Jardine Matheson S-E Asia downgraded to ‘underperform’ by Macquarie; counter closes 7.7% lower

[SINGAPORE] Jardine Matheson Southeast Asia (JMSEA) shed 7.7 per cent or S$2.27 to close at S$27.03 on Wednesday (Oct 7), giving up most its gains from Tuesday’s rally.

In a note published on Wednesday, Macquarie Equity Research downgraded the stock to “underperform” from “neutral”, and lowered its 12-month target price by 10 per cent to S$23.50 from S$26.

Macquarie said the earlier gains were driven largely by dividend-chasing ahead of the upcoming ex-dividend date for JMSEA, which this week changed its name from Jardine Cycle & Carriage.

On Tuesday, the counter rose around 10 per cent to close at S$29.30.

The downgrade comes as the stock trades near an all-time-high net asset value (NAV) premium of 31 per cent, a valuation the research house views as unjustified.

Macquarie estimated that an NAV of at least 8 per cent is warranted to account for Indonesian withholding tax, which affected subsidiary Astra’s dividends and overheads.

The counter typically observes “a 20 to 25 per cent conglomerate discount, consistent with parent Jardine Matheson’s long-term level”, noted the research house.

Why JMSEA’s share price rose

The recent surge in the company’s share price was attributed to investors positioning for a special distribution, equating to roughly US$0.70 a share at the current price, which represents a 3.1 per cent yield, Macquarie said.

The special dividend comprises US$0.37 in cash per share and an in specie distribution of the company’s Toyota Motor shares to its shareholders.

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Combined with an ordinary interim dividend of US$0.28 a share paid on Oct 5, shareholders are looking at a total yield of 4.4 per cent for H2 2026.

However, with the shares set to trade ex-dividend on Thursday, Macquarie said this provided a catalyst for a reversal in JMSEA’s share-price trajectory.

On the corporate front, taking into account the sale of JMSEA’s Cycle & Carriage unit – expected to be completed in Q1 2027 – and the 0.5 per cent stake distribution in Toyota Motor, the broker reduced its net earnings estimates for the company by 7 per cent for 2027 and 8 per cent for 2028.

On the group’s corporate rebranding, Macquarie clarified that the name change “does not mean a cash offer is imminent”.

“We think paying a large NAV premium would be detrimental to JM shareholders,” said the broker, which noted that it is also plausible for JMSEA to distribute other parts of its portfolio in specie to its shareholders for “simplification”.

Citing a lacklustre outlook for earnings, with estimated earnings for FY2028 about 20 per cent below the FY2025 level, Macquarie said that it prefers parent company Jardine Matheson , which it rates as “outperform” with a target price of US$80.