C&C 2000 earnings to be dented by Astra

C&C 2000 earnings to be dented by Astra

SINGAPORE (Reuters): Singapore motor distributor Cycle & Carriage (C&C) is expected to report lower 2000 profits, hurt by foreign exchange losses at its Indonesia unit, PT Astra International, analysts said on Tuesday.

2001 is also expected to be tough for C&C as a slower economy hits demand, but Astra should not be such a weight again.

C&C, a distributor of Mitsubishi, Kia and Proton vehicles in Singapore, is due to release full-year results on Wednesday.

Multex Global Estimates has a consensus profit forecast of S$99.4 million ($57.0 million), compared with S$108 million in 1999. Forecasts ranged from S$50.7 million to S$146.8 million.

"It is going to be a hard time for them because demand for cars might be dampened with the overall economy slowing down," Chew Li-May, analyst at Indosuez W.I. Carr said.

"People would become more cautious and they would think twice before they buy. I am more negative than positive. I might need to downgrade to sell after the results," said Chew, who has a "hold" rating with a price target of S$3.50.

C&C shares were trading at S$3.72 on Tuesday. The stock has outperformed the Straits Times index by more than six percent in the last six months but is off about 32 percent from a 12-month high last May of S$5.45.

Analysts said forex losses by Indonesian unit Astra eroded gains from favorable 2000 car sales in Singapore.

Astra reported net losses of more than $70 million for the 11 months to January, weighed by swap and foreign exchange losses.

The rupiah has shed 28 percent of its value against the U.S. dollar since C&C bought a 31-percent stake, now worth around S$315 million, in the Indonesian auto giant last March.

Some analysts are now scaling back their expectations of the expansion into Indonesia.

"With hindsight that acquisition was not a very good decision for C&C," an analyst at European investment bank said.

"Indonesia is a big market and long-term potential is there. But investors are not so patient," said the analyst.

However, Eugene Lim, analyst at Kim Eng Securities said Astra would provide around S$160 million in 2001 to C&C's bottomline.

He expected C&C's share of Astra's forex loss would drop this year to S$46 million from an estimated S$155 million, based on the estimate the rupiah would depreciate only 10 percent in 2001 compared with 35 percent a year earlier.

He added Astra would stick to its debt repayment schedule to reduce its total U.S. dollar debt to $873 million from $996 million, which should also be positive for C&C.

"(Astra's performance) would be more than enough to offset any slowdown in C&C's traditional businesses."

The outlook for C&C's traditional businesses is bleak as C&C lost wholesale distribution rights for Mercedes Benz, which returned to DaimlerChrysler AG last month.

Lim, who has a hold on C&C and a target price of S$3.74, said the business would also be hit by thinner margins, weaker demand for cars, and a drop in certificate of entitlement prices quota, which car buyers must bid to own a car in Singapore.

C&C's property subsidiary MCL Land was also unlikely to fare much better. Analysts have a consensus profit estimate of S$26.5 million against S$33.8 million a year before.

"The property side of C&C's business would not weather the slowdown much better," Lim said.

SG Securities, which cut its rating to "sell" from "hold" with a target price of S$1.10 for MCL, said the group has had no new project launches and that would affect its earnings.

MCL shares were trading at S$1.12 on Tuesday, off 24 percent from its July highs of S$1.48.