Why Jardine Cycle & Carriage Ltd Is One of The Most Important Company For Indonesia

Jardine Cycle & Carriage Ltd (JCC) is a SGX-listed ASEAN-based conglomerate. It is a part of the Jardine Group where JCC is currently a 75%-subsidiary of Jardine Strategic Holdings Ltd. As of 16 May 2019, its market capitalisation is US$ 13.12 billion, thus, placing JCC as one of the 30 constituents of the Straits Times Index (STI). In this article, I’ll cover on its latest financial results and valuation figures.

Thus, here are 10 things to know about JCC before you invest:

• 3 Core Businesses
  JCC derives income from 3 Core Businesses. They include:
  
  

Core Businesses	Underlying Profits (US$ Million)	Underlying Profits (%)
Astra International	718.7	76.9%
Direct Motor Interest	144.6	15.5%
Strategic Interests	71.1	7.6%
Total Core Businesses	934.4	100.0

*Exclude Corporate Costs

Source: JCC’s FY 2018 Results

• Core Business 1: Astra International
  JCC hass 50.1% shareholdings of Astra International, a diversified listed conglomerate in Indonesia. It has seven main businesses, ranging from automotive, financial services, heavy equipment, mining, construction, energy, agriculture, IT, infrastructure and logistics.
  
  Profits have fallen from 2012 to 2015 due to an overall weakness in the global commodity sector.
  
  Since then, Astra has recorded improvements from its financial services and heavy equipment, mining, construction, and energy division. These divisions have contributed to Astra’s recovery in underlying profits from US$ 470.8 million in 2015 to US$ 718.7 million in 2018.
  
  
  

Source: JCC’s Annual Reports

• Core Business 2: Direct Motor Interest (DMI)
  JCC has the following DMI across Southeast Asia:
  
  

Companies	JCC’s Shareholdings
Cycle & Carriage Singapore	100.0%
Cycle & Carriage Bintang	59.1%
Cycle & Carriage Myanmar	60.0%
Tunas Ridean	46.2%
Truong Hai Auto Corporation	25.3%

Source: JCC’s FY 2018 Results


This segment has recorded significant improvements in performance in 2015. This is due to a huge jump sales volume of vehicles by Truong Hai Auto Corporation. Since then, JCC’s DMI division has averaged US$ 140 million in underlying profits for the last 4 years.

Source: JCC’s Annual Reports

• Core Business 3: Strategic Interests
  JCC has strategic interests in three companies, which are not related to the automobile industry. They are:
  
  

Companies	JCC’s Shareholdings
Siam City Cement	25.5%
Refrigeration Electrical Engineering Corporation (REEC)	24.9%
Vietnam Dairy Product Joint Stock Company (Vinamilk)	10.6%

Source: JCC’s FY 2018 Results

JCC has made around US$ 30 – 35 million in underlying profits per year from Siam City Cement and REEC. In 2018, this segment had increased its underlying profits to US$ 73.5 million as it was contributed by a rise in income from Vinamilk which was acquired in 2017.

Source: JCC’s Annual Reports

• Group Financial Results
  Overall, JCC’s financial results is heavily dependent on Astra. Evidently, I learnt that JCC’s pattern of underlying profits had mirrored Astra’s over the past 10 years. It has dropped from US$ 1.02 billion in 2012 to a low of US$ 631.8 million in 2015. Then, it has climbed to US$ 858 million in 2018. Contributions from DMI and strategic interests are less impactful to JCC at the point of writing.
  
  
  

Source: JCC’s Annual Reports

• Cash Flow Management
  From 2009 to 2018, JCC has brought in US$ 12.5 billion in positive cash flow from operations, US$ 3.9 million in dividends from associates and joint ventures, and US$ 818.0 million in interests income. Out of which, it has spent:
  
  
  – US$ 6.5 billion in net capital expenditures (CAPEX).
  – US$ 1.6 billion in net acquisition of subsidiaries.
  – US$ 2.4 billion in net acquisition of associates & joint ventures.
  – US$ 2.2 billion in net acquisition of other investments.
  – US$ 535.2 million in net acquisition of bearer plants.
  – US$ 376.8 million in net acquisition of investment properties.
  – US$ 3.2 billion in dividend payment to reward its shareholders.
  
  
  As of 31 December 2018, JCC has a cash balance of US$ 1.9 billion. It is an increase from US$ 962.1 million in 2009. Evidently, JCC is a cash-cow and has the ability to invest into strategic companies, expand its market presence across Southeast Asia and make sustainable dividend payouts to its existing shareholders.
  
  
  

Source: JCC’s Annual Reports

• Balance Sheet Strength
  As of 31 December 2018, JCC has reported non-current liabilities worth US$ 3.9 billion and total equity of US$ 13.5 billion. Its gearing ratio is at 28.93% presently, which is relatively stable for the last 10 years.
  
  In addition, JCC has current assets worth US$ 10.1 billion and as well as current liabilities of US$ 9.8 billion. Thus, its current ratio is 1.03.
  
  
  
• P/E Ratio
  As of 16 May 2019, JCC is trading at US$ 33.21 per share. In 2018, it has an underlying profits per share of US$ 2.17. Hence, its current P/E Ratio is 15.30, which is below its 10-year average of 18.15.
  
  
  

• P/B Ratio
  As of 31 December 2018, JCC has net assets of US$ 15.56 per share. As such, it has a current P/B Ratio of 2.13, which is a continuous drop from 3.90 in 2011. The decline in P/B Ratio was caused by its continuous rise in JCC’s net assets despite a slow and gradual decline in its stock prices in most parts of the 10-year period.
  
  
  

• Dividend Yields
  In 2018, JCC has paid out US$ 0.87 in dividends per share (DPS). Hence, it has a current dividend yield of 2.62% per annum, slightly above JCC’s 10-year average of 2.36% per annum.
  
  
  

VIA’s Verdict

Question: ‘What caused a continuous dip in stock price of JCC since 2012?’

Answer: ‘Astra International.’

JCC has recorded a small decline in stock prices, which was in line with weaker results generated from Astra from 2012 to 2015. However, JCC’s improvements in financial results for 2016 – 2018 had yet to be reflected on its stock prices. As such, it has caused JCC to have more attractive valuation figures stated in Point 8, 9, and 10 above.

Source: Google Finance

Source: JCC’s Annual Reports

So, would you invest in JCC at US$ 33.21 per share today?

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