SINGAPORE -- Auto group Cycle & Carriage Ltd (C&C) is likely to post a 73 percent rise in 2002 net profit this week thanks to solid earnings at its Indonesian affiliate, PT Astra International.
The dealer of Mercedes, Kia Motors Corp. and Mitsubishi Motors Corp. cars in Singapore generates the bulk or 80 percent of its profits from a 34.3 percent stake in Astra, Indonesia's biggest car maker.
Astra's finance director announced last month that its net profit more than tripled in 2002.
"An investment case in terms of investors buying into Cycle is not very strong because the bulk of its earnings is coming from Astra," said analyst Winston Liew of Daiwa Institute of Research.
"If you are buying Astra's earnings, you might as well buy Astra," he said.
C&C bought its Astra stake in 2000 after DaimlerChrysler AG announced it would end C&C's wholesale rights to sell Mercedes Benz cars in Singapore, its main earnings driver.
Based on a consensus forecast of 10 analysts surveyed by Multex Global Estimates, net profit is expected to have risen 72.9 percent to S$208.4 million ($119.4 million) from S$120.5 million in 2001. Financial results are due Tuesday.
Liew at Daiwa urges clients to purchase C&C shares, rating the stock a "buy" because of a possible restructuring in its property arm MCL Land that he expects to unlock value.
Liew forecast a 2002 net profit for C&C of S$300 million.
COMPETITION AT HOME
C&C has a 66 percent stake in MCL, which is expected to contribute about 10 percent to profit. Car sales in Singapore, Malaysia and Australia provide the remainder of earnings after Astra's big contribution.
C&C, which is 50.2 percent owned by Hong Kong-based Jardine Strategic Holdings Plc, is struggling at home where sales and margins are pressured by growing competition in the city-state at a time of economic malaise.
C&C remains a Mercedes dealer but is struggling to fill the gap left from ending the higher margin distributorship business.
John Slack, Astra's finance director, said last month that Astra's 2002 net profit would exceed three trillion rupiah ($337 million), a steep rise from 844 billion rupiah in 2001.
Slack said the profit included one trillion rupiah from exchange rate gains.
Analysts in Jakarta said Astra's picture was brightening after the maker of ubiquitous Toyota cars in Indonesia managed to raise about US$158 million from a rights issue and successfully restructured US$820 million in debt in December.
On Thursday, Astra said it would sell the manufacturing part of its Toyota joint venture in Indonesia to its Japanese partner while retaining control of the distribution business -- a deal that analysts said could fetch up to US$200 million.
The moves would help lower its debt burden and allow the group to start paying out a dividend this year.
A mismatch between rupiah-denominated revenue and dollar-denominated borrowing hit Astra when the Asian financial crisis hurt the value of the rupiah against the dollar.
Astra, which also controls more than half of Indonesia's motorcycle market, is an Indonesian conglomerate with significant interests in palm oil plantations and heavy equipment.