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.