Sunday, 3 May 2020

Jardine Cycle & Carriage - An Indonesian Conglomerate (well mainly)

Mention Jardine Cycle & Carriage (Jardine C&C) and the first thing that probably comes to mind is the Mercedes Car it distributes in Singapore. Well, one is indeed right, Jardine C&C is an automobile distributor for Mercedes; however, it does more than that - it distributes other brands such as Kia, Mitsubishi and etc. 

On top of it, it is a distributor for cars in Malaysia and Myanmar. It owns distributorship stakes in Indonesia and Vietnam

A Conglomerate in Indonesia

Besides car distribution, Jardine C&C is big and diverse in Indonesia. It owns a majority stake in Astra International which does financial service, mining, agriculture etc in Indonesia.

The market capitalisation of Astra is currently SGD$14.7 billion. And Jardine C&C 50.1% of stake is valued at $7.35 billion. Astra is trading at only 7.31 times P/E and a dividend yield of 5%; its quite cheap at the moment and I believe if Indonesia recovers from its Covid Lockdown, Astra will recover. 

The current market cap of Jardine C&C is $7.95 billion, this leaves $0.6 billion of Jardine uncounted for. So what other businesses do Jardine C&C have?

Exposure in Vietnam, Thailand and Myanmar

Jardine C&C owns stakes in Siam City Cement (25.5%), in Vietnam, it owns Vinamilk (10.6%), Refrigeration Electrical (29.0%) and Thruong Hai Auto (26.6%). 

As it can be seen, Jardine C&C has quite a diversified exposure in Vietnam and considering Vietnam is industrialising, has a growing economy which has dealt with Covid 19 well and reopened, a large domestic market which insulates it from the closure of international borders now. I am quite optimistic that Jardine C&C stake in Vietnam will grow. 

Jardine C&C stake on Vinamilk alone is $1 billion. So for us shareholders, we are essentially getting the rest of Jardine C&C Vietnam and Thailand Business for free ( as well as their Singapore and Malaysia Mercedes Benz Distributor rights)

Valuation of Jardine C&C

Using the sum of parts method at the Jardine's current share price, investors are only paying for Jardine's stake in Astra and Vinamilk. The rest of Jardine's business is free; as reflected in the market price on the various stock exchanges. * Jardine's stake in Siam City Cement is SGD$4.5 billion and its Refrigeration Electrical stake is $0.16 billion.

To me, this looks like a potential upside of 50% in Jardine's C&C value on the Singapore stock market.

Jardine has a trailing dividend yield of 6.1%, which I think will likely fall. The company declares dividend in accordance with its net profits. For a large conglomerate with exposure to Indonesia and Vietnam, its dividends and market value of its stakes in associate companies is very cheap in my view. 

I am personally optimistic of Jardine's companies and am invested in them. It is important to see how Astra performs financially because that is where Jardine's largest exposure is.

<Vested in Jardine C&C>

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