Dark days ahead for Jardine Cycle & Carriage amid Indonesian slowdown

Astra's outlook is clouded this year.

Jardine Cycle & Carriage is in for a tough year ahead as its cash cow Astra International grapples with Indonesia's economic slowdown.

Analyst Paul Yong of DBS Vickers noted that Astra's outlook is clouded this year by low commodity prices, the Indonesian economy's slowdown and volatile oil prices.

Astra contributed over 90% of Jardine C&C's total underlying profit and Jardine's share price has a 99% positive correlation in USD terms with Astra.

“Coupled with a strong US$ vs IDR outlook, we project 15% earnings decline in US$ terms for JC&C in 2015, and just 1% growth in 2016. The weak earnings outlook for Astra International has triggered a downgrade for Astra International and also anchors our recommendation downgrade for JC&C,” Yong said.

“With the majority of JC&C’s profits coming from Indonesia, JC&C is exposed to the volatility in the Indonesian economy. While we are positive on the longer term prospects for Indonesia, Astra International (and thus JC&C) faces some short-term headwinds in the auto and agribusiness segments,” he added.