7 Things To Know About Jardine Cycle And Carriage

Jardine C&C (SGX: C07) is a Singapore listed company with a market capitalization of S$16.7 billion (June 2017). Its business interests span across many Southeast Asian countries such as Malaysia, Myanmar, Vietnam and Singapore.

Listed in Singapore, here are 7 things you need to know about Jardine Cycle & Carriage.

1. 1. Stock Information

TICKER SYMBOL: SGX: C07

MARKET CAP: S$16.7 billion

SECTOR: Conglomerate

The Business

Jardine business is divided into three groups, namely Astra International (IDX: ASII), Direct motor interests and other interests. Jardine has a 50.1% ownership of Astra International, an Indonesian conglomerate with wide business interest’s financial services, heavy equipment and mining, agribusiness, infrastructure, logistics and others, and information technology.

The Direct motor interests group includes the regional motor interests it has from manufacturing, retail, distribution, fleet management and after sales services for numerous car brands.

Under its other business group, it owns 22% of Refrigeration Electrical Engineering Corporation in Vietnam and 25% of Siam City Cement, a cement company in Thailand.

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

Source: Full year 2016 results presentation

From the table above it is quite evident that Astra International is by far the biggest profit contributor for the group followed by direct motor interest and then other interests.

Let’s narrow down further to understand better the different profit contributors for each group.

Astra International

Source: Full year 2016 results presentation

From the table, it is can be seen that within Astra, the Automotive segment contributed almost 62.5% of profits of Astra. This is followed by Heavy Equipment & Mining and financial services under which run Permata Bank in Indonesia.

Astra is an important business for Jardine, this is because Indonesia has a fast-growing economy which Jardine hopes to take advantage of. Also, Astra being the biggest contributor for the group means its underlying profit is very dependent on Astra doing well.

Source: Full year 2016 results presentation

Under the Direct Motor interest segment, Jardine’s Vietnam operations bring in most of the dough. This is through its subsidiary, Truong Hai Auto Corporation, which is one of the largest automotive companies in Vietnam. Its activities include manufacturing, assembly, distribution, retail and after-sales service of commercial and passenger vehicles, representing brands such as Kia, Mazda, Peugeot, Foton and Hyundai.

Next in line is their Singapore operation under which it engages in retail, distribution and after-sales service of Mercedes-Benz, Mitsubishi, Kia and Citroën motor vehicles.

Lastly, under its other interests profits contributions are not broken down. However, overall this segment contributed about 4.5% of total profits.

For fiscal year ending 2016, Jardine reported revenue of US$15.76 billion and profit of US$702 million.

Key Opportunities

Regional expansion

Jardine’s business interest in the automotive sector are widespread. With its business interests in many Asean countries which are expected to grow over the next decade, this puts Jardine in a sweet spot to ride the growth in the future. With its expourse to countries such as Indonesia, Myanmar and Vietman, Jardine has positioned itself well.

Within Indonesia, Jardine is also in many other sectors through its ownership of Astra. It has exposure to agriculture and mining, 2 important sectors for the Indonesian economy. It also has exposure to Indoneisa’s financial sector and property sector which are poised to grow.

Non-Automotive business growth

Jardine’s exposure to other sectors such as ready-mix cement and refrigeration allow it to expand its business reach into other important sectors. Ready mix cement is routinely used in the building and construction industry which should only continue to accelerate in the Asean region as countries continue to build new infrastructure.

Its refrigeration business in Vietnam give it access to business operations in mechanical and electrical engineering services, real estate, and power and water utility infrastructure. These are again essential services for a developing country.

Having a first mover advantage in both these sectors above allow Jardine to capture market share and build its dominance before competitors come in.

Key Risks

Automotive is a discretionary industry

One of the key risk that Jardine faces is the volatility of its earning. This is because the automotive industry which is the biggest contributor for the company is sort of a discretionary industry. Due to this if any of the fast growing markets that Jardine depends on faces a slowdown spending on Automotive will drop as well.

In my opinion Jardine C&C has done a good job by trying to diversify its risk, by investing in other sectors such as cement and electrical & mechanical works, however these are still make up only a small part of its revenue and profits.

Stiff competition

Jardine Cycle & Carriage only has a handful of brands under its belts in many of the countries where it has a presence. Needless to say, the other car brands will also be present there due to the regions fast growth. This means that Jardine faces competition in both branding and price. If other brands that are not sold by Jardine can gain a strong foot hold on the market, it could spell trouble for Jardine.

Valuation

Jardine C&C currently trades at a Price to earnings (P/E) ratio of 16.6 and spots a 2.3% dividend yield for its investors. Both of these metrics are higher when compared to its five year average of 13.5 P/E ratio and 3.2% dividend yield.

1. Investor Relations

Investor Relation Material:

• Annual Report

Jardine Cycle & Carriage Limited

239 Alexandra Road
Singapore 159930
Email: corporate.affairs@jcclgroup.com
Tel: (65) 6473 3122
Fax: (65) 6475 7088

Top Shareholders (2^nd August 2016)

1. Jardine Strategic Singapore Pte Ltd 75.00%
2. DBS Nominees Pte Ltd 7.56%
3. Citibank Nominees Singapore Pte Ltd 5.95%

Financials

Income Statement

Balance Sheet

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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 and do not in any way represent those of his employer and other related entities. Ketz does not own any companies mentioned.

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