Indonesia And Vietnam Expansion Will Drive Long-Term Earnings Power And Portfolio Strength

Catalysts

About Jardine Cycle & Carriage

Jardine Cycle & Carriage is a long-term investment group focused on market-leading businesses across Indonesia, Vietnam and the broader Southeast Asia region.

What are the underlying business or industry changes driving this perspective?

• Deepening exposure to Indonesia and Vietnam, two of the fastest growing profit pools in Southeast Asia, positions the portfolio to capture structurally higher consumption and infrastructure spending, which is expected to support revenue growth and compounding earnings.
• Active engagement with portfolio companies on capital allocation, including disciplined investment criteria and a clear pathway to strategic influence or control, is likely to lift return on invested capital and underpin expansion in net margins over time.
• Scaling platforms in automotive, used cars and commercial vehicles, including Astra's partnership with Toyota in OLXmobbi and new brand additions in Singapore, should benefit from rising vehicle penetration and mobility demand, supporting higher revenue and potentially more resilient earnings.
• Growing investments in renewable energy and industrial and logistics infrastructure such as geothermal power and logistics properties in Indonesia align with accelerating energy transition and e-commerce-related demand, creating new recurring income streams and diversifying profit drivers.
• Stronger balance sheet flexibility at the holding company, with a move to consolidated net cash and reduced net debt, enhances capacity to pursue opportunistic acquisitions in selected sectors, which may support earnings per share growth and progressive dividends.

Assumptions

This narrative explores a more optimistic perspective on Jardine Cycle & Carriage compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Jardine Cycle & Carriage's revenue will grow by 1.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.7% today to 5.6% in 3 years time.
• The bullish analysts expect earnings to reach $1.3 billion (and earnings per share of $3.32) by about December 2028, up from $833.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 9.8x on those 2028 earnings, down from 12.3x today. This future PE is lower than the current PE for the SG Industrials industry at 20.3x.
• The bullish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.65%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent macroeconomic softness in Indonesia, already reflected in a 9% decline in contributions from Astra and Tunas and a 9% drop in the four wheel wholesale market, could signal structurally weaker consumer demand and more cyclical mining activity than assumed, which would pressure group revenue and constrain earnings growth over time.
• The heavy equipment, mining, construction and energy segment faces structural headwinds from lower coal prices, weather related disruption to overburden removal and an eventual energy transition away from fossil fuels. Even with higher Komatsu sales and aftersales revenue, the long term earnings power of United Tractors may erode and weigh on both net margins and group profits.
• Strategic capital deployment into new areas such as renewable energy, geothermal assets and industrial and logistics properties in Indonesia carries execution and return on invested capital risks. If these projects fail to generate returns comfortably above the cost of capital as targeted, they could dilute overall ROIC and constrain earnings and dividend growth.
• Greater reliance on high growth Southeast Asian markets like Indonesia and Vietnam to drive superior five year total shareholder returns increases exposure to local competitive intensity and policy or regulatory changes. If market leaders like Astra, THACO or key partners such as Stellantis face margin compression in automotive or mobility, JC&C could see structurally lower net margins and slower earnings compounding than implied.
• The group strategy of actively managing the portfolio, divesting businesses such as Siam City Cement and seeking strategic influence or control in new investments heightens concentration and timing risk. If portfolio reshaping extends beyond the targeted first half of 2026 or misjudges sector cycles, there is potential for periods of weaker revenue growth and volatile earnings that could challenge the assumption of a flat share price.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Jardine Cycle & Carriage is SGD33.99, which represents up to two standard deviations above the consensus price target of SGD28.37. This valuation is based on what can be assumed as the expectations of Jardine Cycle & Carriage's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SGD33.99, and the most bearish reporting a price target of just SGD22.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $23.5 billion, earnings will come to $1.3 billion, and it would be trading on a PE ratio of 9.8x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of SGD33.56, the analyst price target of SGD33.99 is 1.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.