months. CPO prices are likely to remain under pressure as the lower oil price has weakened the
position of palm oil as a biofuel. Demand for palm oil is also expected to be lower.
Agribusiness supported by strong ASP for CPO in 1H08. While the declining CPO prices are
likely to affect JC&C’s agribusiness going forward, we believe the impact for FY08 would be
partially offset by the strong CPO prices we saw in 1H08. JC&C’s subsidiary, Astra’s ASP for
CPO was over IDR8,000 per kg during the first six months of the year. Hence, we are expecting
a slight increase YoY in CPO ASP for FY08, compared with FY07. The agribusiness accounted
for 33% of JC&C’s operating profit in FY07.
We continue to like JC&C for its diversified businesses, although the current economic environment is weak. With the slowdown in the global economy, we have lowered our ascribed
PE valuations for the Group’s businesses. We are maintaining our earnings estimate of
US$398.8m for FY08, as we had already factored in the declining CPO price. Based on our
SOTP valuation, we arrive at a lower target price of S$12.28, down from S$19.40 previously. At
the current price of S$9.97, our revised target price presents an upside of 23.2%. Assuming that
JC&C maintains its dividend payout ratio, the potential dividend yield would be an attractive
4.4%. Although the share price is rather volatile lately, we maintain BUY.
The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned
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