Jardine Cycle and Carriage under selling pressure

Most car owners in Singapore will be familiar with the name Jardine Cycle and Carriage (JC&C), a company involved in the retail, distribution, and provision of after-sales service for Mercedes-Benz, Mitsubishi, Kia and Citroen vehicles.

Mercedes Benz
Source: Bloomberg

JC&C also has its fingers in many other pies, such as financial services, IT, logistics and perhaps most notably a 50.1% stake in Astra International, an Indonesian conglomerate and the country’s largest car manufacturer.

The company’s stock has enjoyed a decent rally for most of the year, up over 16% year-to-date, but recently its share price performance has been less stellar. Since the release of its Q2 earnings results back in August, investors have been selling off their holdings and pulling down the stock price by over 10%, over the past two months.

Fundamentally, headwinds abound as a significant portion of its earnings is contributed by Astra. For Q2 2014, Astra accounted for more than 90% of the group’s $413 million underlying profit.

JC&C also warned that Astra has continued to face heightened competition in the car market and the effects of softer coal prices in its other business units.

Another significant risk is the likelihood of the rupiah weakening against the greenback, which will erode any earnings growth. With QE3 scheduled to end in October and Indonesia being one of the members of the ‘fragile five’, we could be looking at further downside for the rupiah.

JC&C has become a favourite of short sellers in recent weeks. 67% of IG clients this week have taken a short position on the stock.

Technically, the stock’s 50 DMA has just crossed under its 100DMA, suggesting we can expect further bearishness ahead. It has also broken below its lower Bollinger band, which might signal further downward acceleration.

The stock price looks to be starting a downtrend line and the next support level it is likely to test is at $39.29 – a 61.8% Fibonacci retracement and a previous resistance.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.