Here's why Jardine Matheson's profits would have risen to US$1.52b

Instead of dipping to $1.479b.

According to Nomura, Jardine Matheson reported FY12 recurring profits of USD1.479bn, -1% y-y. If  the one-off, non-cash item at Dairy Farm will be added back, adjusted profits would be USD1.52bn, which is in line with Nomura's estimate and consensus. 

Here's more:

A flat result is also consistent with previous management guidance. Despite flat underlying profits, DPS was up 8% y-y to USD1.35 which is ahead of our forecasted USD1.30. This reflects JM’s strong financial position with only 8% net gearing (excluding financial services companies) at the end of 2012. 

Management expects a more positive business outlook for 2013, and in the outlook statement, they commented that “most of the Group’s businesses continue to trade well.”

This is consistent with our positive view on JM’s 2013F earnings recovery story from our initiation in July last year, underpinned by Astra (low-cost green cars, stabilising miningrelated businesses), Dairy Farm (structural growth in Asian retail), and Hongkong Land (higher residential completions).

Jardine Motors’ China business, which saw signs of improvement in 2H12 with narrower losses, should continue to recover this year on the back of more new models. 

JM’s share price has risen 4% in the past two days preceding today’s result announcement. We expect the share to give back some of these gains in the near term, considering that the actual result was only in line.

Despite this, given its 2013F recovery story is intact, we remain positive on its share performance on a longer term basis.

Performance by division
Better than expected – Astra (+9% y-y in local currency terms) was 2% ahead of us, and HK Land (core profits +10% y-y) was 11% ahead of our analyst Paul Louie’s forecast, with marginal improvement in rental, occupancy and valuation growth.

Jardine Motors, whose profits declined by 71% y-y to USD18m, actually came in ahead of our breakeven estimate, as losses in China narrowed in 2H12. 

Weaker than expected – Dairy Farm (adjusted profit +13% y-y) was 5% below us owing to weaker Malaysia/Singapore contributions, while reported profit was further hit by a non-cash USD59m reversal of supplier income in Malaysia.

Jardine Pacific (-15% y-y) was 12% below us mainly owing to a weaker restaurant performance in Taiwan. 

JM, which reports in USD, were also hit by an average 7% weaker Indonesian rupiah, but this is in line with our expectation.