Jardine Matheson Holdings Limited

[donmihaihai]

Rather than read what they say, I would rather see what they do. While the 1st layer JSH, right below JMH is removed, the group is getting more complex right below the current 1st layer, which is HKL, JCC, MOIL and DFI.

And you are right, how much capital invested in actually more important than interest % unless one is hunger for control. And those substantial associates and investments, getting larger and some are looking large enough and about equal or getting more capital invested over the years that they start to weight like the 1st layer HKL, JCC, MOIL and DFI or even Jardine Pacific.

I am very certain JMH investment in JCC isn't the 2nd lowest among these 4 listed subsidiaries unless you separate Astra from JCC. Btw, any investment in Astra need to pass through JCC.

Anyway comparing JSH 2014 interest in these 4 subsi against 2024 interest is not apple to apple. JMH only control 80 to 85% of what JSH control in 2014. Look out for effective interest in the note, which should be only 80 to 85% of your figure. Go back even earlier, in 2005, that effective interest was even lower. Look at the history at JMH website, the initial interest in Cycle and Carriage was purchased in 1992 @ 16% which likely through JSH. 32 years later, JMH interest @ about 81%. In my opinion, the current JCC is a totally different animal as compared to 1992, there is no value of it being listed.

If you really look, there are many "JCC" because JMH doesn't really build new businesses.

Recent years have been very good to JMH because it has been eating up across its group cheaply.

[weijian]

Hi ghchua,

I am definitely not under an illusion that a comparison taking 5mins to make up, will tell a full story on allocation for tens of billions of market cap.

Since the Taipans already control all 4 of them and none of them are in need of capital thus far (ie. equity fund raising), we can reasonably assume that the singular goal of any particular capital allocation is to maximize the returns. So, it is less probable that they increase into MOI just because lesser capital was invested.

I am not ambitious enough to try to understand nor 2nd guess their capital allocation strategies. I think the Taipans have some good businesses but unfortunately, I prefer to be slightly selective. As such, I have to go into some details especially comparisons about how much more they put in between each other, so as to improve my battling odds.

For example, if they have been increasing their stakes directly, would that suggest lower odds of an equity fund raising?

[ghchua]

I am very certain JMH investment in JCC isn't the 2nd lowest among these 4 listed subsidiaries unless you separate Astra from JCC. Btw, any investment in Astra need to pass through JCC.

Hi donmihaihai,

Yes, they are separated. Not that I wanted to separate them, but it was as disclosed in their latest annual report. I just refer to their numbers there in Page 19 on the pie chart.

[donmihaihai]

I am very certain JMH investment in JCC isn't the 2nd lowest among these 4 listed subsidiaries unless you separate Astra from JCC. Btw, any investment in Astra need to pass through JCC.

Hi donmihaihai,

Yes, they are separated. Not that I wanted to separate them, but it was as disclosed in their latest annual report. I just refer to their numbers there in Page 19 on the pie chart.

I was thinking about the segmental number in the notes. 

I happen to see the number in the pie chart telling the story of how much capital the companies within JHM invested in FY2023. JCC USD1B figure reflected additional USD350M convertible bond of Thaco plus additional interests in associates, plus capex of JCC Singapore & Malaysia plus figures from associates. Check through the cashflow statement, there is no way JMH would invest USD10B ++ (CAPEX plus investment) in 2023. 

The capital investment by JMH in JCC in my mind is how much JMH spent to purchase the 81% stake in JCC.

[ghchua]

The capital investment by JMH in JCC in my mind is how much JMH spent to purchase the 81% stake in JCC.

Yes. The capital investment pie chart reflected how much they have invested in those businesses to date, not just in FY2023 only. Hope that it clarifies.

[ghchua]

Since the Taipans already control all 4 of them and none of them are in need of capital thus far (ie. equity fund raising), we can reasonably assume that the singular goal of any particular capital allocation is to maximize the returns. So, it is less probable that they increase into MOI just because lesser capital was invested

I am not ambitious enough to try to understand nor 2nd guess their capital allocation strategies. I think the Taipans have some good businesses but unfortunately, I prefer to be slightly selective. As such, I have to go into some details especially comparisons about how much more they put in between each other, so as to improve my battling odds.

Hi weijian,

But you seem to want to select to invest in some of those businesses that they have invested in on a portfolio basis. Granted that they have added more capital into some of those businesses over the last few years, the total capital invested reflected what they have put in since day one, and that should be used as a reference point in respect to their view on their core businesses and long term investing framework.

Adding more into MOI does not move the needle much in terms of total capital invested throughout the years. Any capital allocation decisions that they have made would be with an intention to maximize returns. This include retaining their stake in HKL and DFI as well. Rather than only looking at their stake in the listed entities, one should also read into what they have done in these entities to maximize returns, including divesting Malaysia Grocery Retail business and property assets in DFI, undertaking share buyback at HKL and also at JMH level as well.

[weijian]

@donmihaihai,
Acknowledged the portion of effective interest since it was still cross-linked JS-JMH back in FY14. The comparison was done in such a way to reflect that JMH hasn't directly increased its stakes in DFI and HKL, despite both of them dropping in publicly traded prices.

JCC share price has good correlation to Astra (not sure about causation) which suggests that funds are probably using JCC as a proxy. JCC's stake in Astra has not changed from 50.1% for almost 20 years? So from accounting perspective, the Taipans are happy enough to keep it at 50.1%. Taipans increase their Astra's exposure through increasing their stake in JCC - your "JCC has no value" may have some truth.

Finally its actual businesses hasn't been doing good and that is fundamentally why it has been good to JMH as it ate up the group - Recent years haven't been good to the operators but have been good to the accountants. As the old saying goes - good prices and good times/news seldom come together. On hindsight, the Taipans had plenty of excess fat and were able to selectively shed some of them to reduce debt and increase exposure to "core assets".

@ghchua,
I can't 2nd guess their asset allocation strategies, does not mean I shouldn't be selective, especially if the structure/layer allows us to selective as the Taipans has 4 listed entities. In addition, the standard playbook for the OPMI to be positioned at the subsidiary level to benefit from the up flow of cash, cannot be too wrong. As usual, I keep myself out of asset heavy (HKL) or more complicated/competitive businesses (DFI).

[donmihaihai]

The capital investment by JMH in JCC in my mind is how much JMH spent to purchase the 81% stake in JCC.

Yes. The capital investment pie chart reflected how much they have invested in those businesses to date, not just in FY2023 only. Hope that it clarifies.

Let me pull some figures. You might think differently.

Total capital investment - FY2021 - USD15 billion, FY2022 - USD9.7 billion, FY2023 - USD10.5 billion.  

copy 2021 comment on the USD15B
The Group’s capital investment, including expenditure on properties for sale, was US$10.3 billion in 2021, and capital investment at its associates and joint ventures exceeded US$4.7 billion. The Group continues to invest for the longterm and ensure that its businesses have the resources to drive future growth.

@Weijian
I see it differently. On control perspective, JMH control Astra with 50.1% interest. Accounting and economic perspective aligned here, which is effective interest.  Before the privatisation of JSH, JMH had 3 ways to increase their exposure. 1) JCC acquire Astra shares, 2) JSH acquire JCC shares, 3) JMH acquire JSH shares. 

As of now, Astra market capitalisation is about SGD15 billion, half of that is about SGD7.5 billion, JCC market capitalisation is about SGD11 billion, JMH market capitalisation is about USD11 billion. JCC will not be able to do much with its holding company level cashflow. But when one add JMH holding level cash flow, then it is different. At the moment, JCC does not help but rather act as a roadblock for the flow of capital.

Also, as compared to say 10 to 15 years back, JMH as a group isn't doing as good but it is still doing very decent. Those were the years where JMH was able to generate underlying profit/ equity of 10% or more and ROE of 20% to 30%. Mind you, HKL investment properties are carried at fair value. In those years, JMH property, DFI and Indonesia/ commodities were red hot.

[ghchua]

Let me pull some figures. You might think differently.

Total capital investment - FY2021 - USD15 billion, FY2022 - USD9.7 billion, FY2023 - USD10.5 billion.  

Hi donmihaihai,

So there had been a reduction in total capital investment from FY2021 to FY2022. Have they got back some capital from disposing assets? Or is it because of the buyout of Jardine Strategic? I am not very sure on the details as I didn't track closely on those numbers.

[donmihaihai]

Off my head, JSH was a USD5.5B buyout, ie an additional USD5.5B investment.

Re-copy the comment by JMH which pretty much sum up the USD15B. 10.3 + 4.7 = 15

The Group’s capital investment, including expenditure on properties for sale, was US$10.3 billion in 2021, and capital investment at its associates and joint ventures exceeded US$4.7 billion. The Group continues to invest for the longterm and ensure that its businesses have the resources to drive future growth.