JARDINE Matheson Holdings (JMH) has been downgraded to " hold" by CGS-CIMB in a research note on Tuesday, as it believes the shares have already priced in short-term recovery expectations.

 

Shares of JMH were trading at US$53.47 as at 11.35am on Wednesday, down US$1.05 or 1.9 per cent from the previous close. However, the stock has gained around 34.8 per cent during this quarter, up from the US$39.68 close on Sept 30.

 

" We believe JMH' s share price has priced in short-term recovery expectations," CGS-CIMB analyst, William Tng, wrote. " Recovery is likely to be a slow and long process, hence, we downgrade JMH to a ' hold' ."

 

While the rating has been downgraded, the brokerage has increased its target price (TP) for JMH to US$54.68 based on a 0.85 price-to-book value ratio (P/BV), in line with the historical average for the 2000 to 2019 financial years.

 

CGS-CIMB' s previous TP for JMH was US$48.61 based on a 0.78 P/BV. It believes that most of the bad news has been priced in, and JMH could rerate back to its historical average P/BV.

 

The brokerage noted that there was sequential improvement in business, with JMH guiding that there was some improvement in performance across many of the group' s businesses in the third quarter, compared to Q2 2020.

 

However, the group has also guided that performance is expected to remain weak in the fourth quarter, significantly influenced by the impact of Covid-19 and the reduction of government support, the analyst wrote. He noted that the key earnings contributors for JMH are Hongkong Land, Dairy Farm International and Jardine Cycle & Carriage.

 

For Hongkong Land, CGS-CIMB noted that the Hong Kong Central office portfolio continued to register positive rental reversion in the first half of 2020, despite rising vacancy. It also noted that the valuation remained attractive, at 60 per cent discount to net asset value. It has an " add" rating on Hongkong Land, with a TP of US$5.10.

 

On Dairy Farm, the brokerage also had an " add" rating, with TP of US$4.50. It noted that while medium-term prospects are uncertain, sentiment for the stock is likely to improve once recovery plays are revisited.

 

For Jardine Cycle and Carriage, CGS-CIMB noted that performance continued to be affected by challenging trading conditions, caused by weak business and consumer sentiment, although there was some improvement in a number of its businesses quarter on quarter. It does not have a rating on Jardine Cycle and Carriage.

 

The analyst said the key upside and downside risks for JMH remain Covid-19' s impact on economic conditions in Greater China and South-east Asia, as well as US-China tensions.

 

JARDINE Matheson Holdings on Tuesday reported declining net profits in the third quarter of 2020 from a year ago, due to the impact of the Covid-19 pandemic and as government support tapers off.

 

Compared with Q2 however, the group saw improvement in many of its businesses, thanks in part to government support, the company said in an interim management statement on Thursday, without specific numbers.

 

Jardine Pacific had an overall increase in earnings in Q3 from the previous quarter, with improved contributions from Jardine Engineering Corporation, Hong Kong Air Cargo Terminals Limited and Jardine Restaurant Group' s Pizza Hut businesses in Hong Kong and Taiwan.

 

Gammon Construction' s order book remained healthy, boosted by its securing of Hong Kong International Airport Terminal 2' s expansion works project in August, it added.

 

Jardine Motors' performance improved in Q3 from Q2, with Zung Fu China and Zhongsheng benefiting from a strong recovery in luxury car sales.

 

Other businesses however experienced weaker underlying trading performances. Jardine Aviation Services had been significantly affected by low flight volumes and remain " loss-making" , Jardine said.

 

As for Jardine Strategic' s businesses, Hongkong Land' s overall performance continued to be negatively impacted by the pandemic, it said. In particular, retail rent in its investment properties business took a hit, although contributions from the office portfolio remained stable.

 

However, sentiment in Hongkong Land' s main markets in mainland China has generally recovered to pre-pandemic levels, it said.

 

Dairy Farm also had better showing in Q3 than Q2, although it continued to be affected by Covid-19. Grocery retail performed strongly in North Asia, Singapore and Malaysia, supported by operational improvements as part of the group' s multi-year transformation programme, as well as changing customer behaviours as a result of the pandemic. This was not the case for Indonesia, however, which faced significant impact from government restrictions.

 

Meanwhile, Mandarin Oriental also continued to be severely impacted by Covid-19, with business levels remaining low even though almost all hotels in its portfolio have reopened. It added that a material recovery is not expected until the second half of 2021, which means it will report a " substantial loss" for 2020.

 

Jardine Cycle & Carriage' s performance also continued to be affected by challenging trading conditions, the group said, although Q3 had better showing than Q2

 

JARDINE Matheson Holdings on Tuesday reported declining net profits in the third quarter of 2020 from a year ago, due to the impact of the Covid-19 pandemic and as government support tapers off.

 

Compared with Q2 however, the group saw improvement in many of its businesses, thanks in part to government support, the company said in an interim management statement on Thursday, without specific numbers.

 

Jardine Pacific had an overall increase in earnings in Q3 from the previous quarter, with improved contributions from Jardine Engineering Corporation, Hong Kong Air Cargo Terminals Limited and Jardine Restaurant Group' s Pizza Hut businesses in Hong Kong and Taiwan.

 

Gammon Construction' s order book remained healthy, boosted by its securing of Hong Kong International Airport Terminal 2' s expansion works project in August, it added.

 

Jardine Motors' performance improved in Q3 from Q2, with Zung Fu China and Zhongsheng benefiting from a strong recovery in luxury car sales.

 

Other businesses however experienced weaker underlying trading performances. Jardine Aviation Services had been significantly affected by low flight volumes and remain " loss-making" , Jardine said.

 

As for Jardine Strategic' s businesses, Hongkong Land' s overall performance continued to be negatively impacted by the pandemic, it said. In particular, retail rent in its investment properties business took a hit, although contributions from the office portfolio remained stable.

 

However, sentiment in Hongkong Land' s main markets in mainland China has generally recovered to pre-pandemic levels, it said.

 

Dairy Farm also had better showing in Q3 than Q2, although it continued to be affected by Covid-19. Grocery retail performed strongly in North Asia, Singapore and Malaysia, supported by operational improvements as part of the group' s multi-year transformation programme, as well as changing customer behaviours as a result of the pandemic. This was not the case for Indonesia, however, which faced significant impact from government restrictions.

 

Meanwhile, Mandarin Oriental also continued to be severely impacted by Covid-19, with business levels remaining low even though almost all hotels in its portfolio have reopened. It added that a material recovery is not expected until the second half of 2021, which means it will report a " substantial loss" for 2020.

 

Jardine Cycle & Carriage' s performance also continued to be affected by challenging trading conditions, the group said, although Q3 had better showing than Q2.