Post recent strong 4Q09 results, we have raised our 2010E-12E EPS by 4%-10%. This is primarily driven by better-than-expected Astra earnings performance, which led us to raise our Astra 2010-12E earnings by 2%-5% largely on higher auto/heavy equipment sales. We have also raised our Jardine Cycle & Carriage’s non-Astra earnings estimates, mainly Singapore and Vietnam motors, which were stronger than expected.

Implications
Despite Astra International’s recent strong share price performance, Jardine Cycle & Carriage has not benefited much with the stock flat ytd vs. Astra’s +17% (97% correlation historically). In our view, the share price
divergence is largely due to its substantial shareholder, Malaysia Employee Provident Fund selling part of its stake this month (remaining stake is 6.5%); this has effectively expanded Jardine Cycle & Carriage’s current NAV discount to 28%, the bottom of its historical trading range between -28% to +26%. While we retain our Neutral rating as we see better upside elsewhere, we see potential near-term mean reversion trading upside for Jardine Cycle & Carriage, given its historical 10% average NAV discount. For investors looking for exposure to Astra, we would recommend Jardine Cycle & Carriage as a less expensive alternative.

Valuation
Post our Astra earnings/TP revisions, we have raised our 12-month NAV-based TP to S$30.60 (from S$28.60), still pegged at a 10% discount to its 2010E NAV, in line with the historical 10% average NAV discount. On a P/E basis, the stock trades at 10X 2010E P/E, vs. MSCI Indonesia and Astra International’s 14X.

Key risks
Key risks are Astra-related – upside: better-than-expected motorcycle/car/ heavy equipment sales and margins; downside: sales slowdown, weak commodity prices, competition.