7 Things You Need To Know About Jardine Matheson Holdings Limited

Jardine Matheson Holdings Limited (JMH) (SGX: J36) ([stock_quote symbol=”SGX:J36″ show=”name” nolink=”1″ class=”1″]) is a conglomerate listed on the Singapore Exchange. The company has a market capitalization of US$47.2 billion.

With that, here are 7 things you need to know about JMH.

Stock Information

1

TICKER SYMBOL: SGX: C07

MARKET CAP: USD 47.0 Billion

INDUSTRY: Conglomerate

The Business

Jardine Matheson is a diversified Asian-based group founded in China in 1832. It operates through eight subsidiaries: Jardine Pacific, Jardine Motors, Jardine Lloyd Thompson Group plc (LON: JLT), Hongkong Land Holdings Ltd (SGX: H78), Dairy Farm International Holdings Ltd (SGX: D01), Mandarin Oriental International Ltd (SGX: M04), Jardine Cycle & Carriage Ltd (SGX: C07) and Astra International TKB PT (IDN: ASII).

The company’s subsidiaries provide services in a wide range of areas.  Some of which are in the fields of engineering and construction, insurance broking, property investment and development, retailing, luxury hotels and motor vehicles related activities.

Let’s have a look at the contributions from the different segments.

Jardine matheson

Source: Full year 2016 results presentation

From the diagram above, the biggest contributors to JMH are Hongkong Land followed by Astra and then Dairy Farm International. It is also interesting to note that all these subsidiaries are mainly focused on the Asian and South East Asian markets. This shows that the group’s focus is right here in Asia. Let’s drill down to understand why these segments saw low or negative growth.

Hongkong Land

Hongkong Land is JMH’s property holding subsidiary. Its main focus is Hongkong as its name suggest where it owns 11 prime properties located in the CBD area. It also has interested in 3 properties located in Singapore and other properties around the region, such as Bangkok, Shanghai and Vietnam. You can read more about our analysis of Hongkong Land here.

Astra International

Moving on, Astra is an Indonesian conglomerate with business interests in a wide range of businesses. Its focus is on the Indonesian market where it involved in the Automotive business, financial services, property development and agricultural business. With the Indonesian economy facing strong growth over the past few years it’s no doubt that Astra is a very subsidiary for the company going forward. Astra International is owned through its stake in Jardine Cycle and Carriage. You can read more about Astra International here.

Dairy Farm International

Next, Dairy Farm International is a supermarket and hypermarket subsidiary of JMH. It owns giant, cold storage here in Singapore and in other regions. In Indonesia, it also runs IKEA. Dairy Farm runs an essential business for the most part selling household necessities and for that reason I feel it is a business that will do well and be around for a long time.

Others

Lastly, the other subsidiary’s in JMH’s stable consist of Automotive retail through Jardine C & C, luxury hotel ownership and management through Mandarin Oriental and Insurance services through Jardine Lloyd Thompson. All these businesses while not the biggest for the group help to provide JMH with a diversified revenue and profit stream which ensures stability in JMH’s earnings year after year.

For the fiscal year ending 2016, Jardine reported revenue of US$37.05 billion and profit of US$1.39 billion.

Key Opportunities

Regional expansion

JMH’s business interests are widespread. Many of its business interests are focused on the ASEAN and Asian countries which are expected to grow over the next decade, this puts JMH in a sweet spot to ride the growth in the future. Countries such as China and Indonesia have been growing at a fast pace for the last couple of years, and new emerging markets such as Vietnam allow JMH to cement a strong foothold in this region. These growth drivers should keep JMH busy for the next decade at least or more.

Growth in Dairy Farm International

One of JMH’s subsidiary has in the last few years started looking at new markets to accelerate its growth. Dairy Farm had a dominant position in the supermarket and hypermarket business in Indonesia, Singapore, Malaysia and Hongkong. In the last 2-3 years, it also started acquiring interests in supermarkets in Macau and China. Currently, it holds a 19.9% stake Yonghui Superstores, which is one of the biggest supermarkets in China. With China’s middle class growing at neck breaking speed for the next decade, JMH is positioning itself well to capture the growth in spending on essentials. This is because as more people move to cities they will be shopping more for goods at supermarkets and this means revenue and profits should increase.

Key Risks

Volatility in Emerging Markets

One of the key risks for JMH is its exposure to the ASEAN and Asian markets, while these markets provide good growth prospects there are risks as well. Usually, emerging markets face uneven growth, what I mean by this is they grow very fast for a few years then slow down. And this volatility in growth can cause JMH’s earnings to swing wildly.

For this reason, it is important that JMH diversifies its earnings base across sectors as some sectors are less affected than others. Also, JMH is exposed to currency risks which the company needs to manage prudently. All said, investors shouldn’t expect a smooth ride if they were to invest in JMH.

Stiff competition

While growing markets offer great growth opportunities, it also brings competition along with it. This is because local firms who have established themselves over many years will have a good foothold on the local market and trust with the people. This can make it challenging for new regional companies to enter the market and prosper. On this front JMH has been quite prudent, as it usually looks to set up local partnerships with companies that have a good understanding of the local market.

But JMH is not the only company doing this, other conglomerates are also following suit with this strategy which means JMH has to be very selective in choosing partners and ensure it retains a competitive advantage if it wants to prosper.

Valuation

JMH currently trades at a Price to Earnings (P/E) ratio of 9.7 and spots a 2.3% dividend yield for its investors. Both metrics are lower when compared to its five-year average of 11.7 P/E ratio and 2.5% dividend yield.

Investor Relations

Investor Relation Material:

Financials

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The information provided is for general information purposes only and is not intended to be any investment or financial advice. All views and opinions articulated in the article were expressed in Ketz’s personal capacity. It does not in any way represent those of his employer and other related entities. Ketz does not own any companies mentioned.

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