Jardine Matheson/ Jardine Strategic

Jardine Matheson/ Jardine Strategic: StanChart initiates coverage of Jardine Matheson (JM) with an In-Line rating and Jardine Strategic (JS) with an OUTPERFORM. StanChart considers both JM and JS core holdings due to their: (1) focus on the right markets; (2) well-positioned franchises; (3) strong management track record; (4) low risk profile; (5) solid sustainable growth outlook; and (6) reasonable valuations. JM and JS shares have delivered total returns of 132-139% over the past five years versus a 14% return for the MSCI AXJ. Over the past decade, the outperformance versus key benchmarks is more spectacular, at over 1,000ppt, mostly due to underlying profit CAGRs of 20-22% at JS and JM and 15%+ at subsidiaries. Over this period, StanChart estimate management’s strategy of increasing stakes in subsidiaries enhanced JS and JM’s profit growth by more than 50%. However, barring a privatisation or major acquisition, house expect profit growth to moderate but remain quite respectable over the next 3-5 years. StanChart has TP of US$71.50 for JM; StanChart has TP of US$44.75 for JS;