Jardine Matheson Holdings Limited

[gautam]

I could not find any thread on JMH400 so thought I put up one for discussion.

Here's a brief intro. Frankly hardly a single a day can pass without anyone not patronising their stores or services.

The Jardine Matheson Group is an Asian conglomerate with operations across a wide range of sectors and countries, and a history stretching back nearly 200 years. The Group has two listed holding companies: Jardine Matheson Holdings (JMH) (OTC:JARLF, ADR OTC:JMHLY) and Jardine Strategic Holdings (JSH) (OTC:JDSHF, ADR OTC:JSHLY). Both are good values, trading at substantial discounts to their underlying value, although in my view JMH is the one to buy.

Corporate structure

The Group has a complicated corporate structure with numerous listed entities. JMH is the main holding company. Below JMH is a second listed holding company, JSH, in which JMH has a shareholding of around 83%, with a free float of 17%. Both JMH and JSH are incorporated in Bermuda, but remain headquartered in Hong Kong. The companies are listed in Singapore (J36.SI for JMH, J37.SI for JSH), where the majority of trading occurs. The ADRs and ordinary shares and are traded on an OTC basis in the US; the ADRs appear to be much more liquid.

The majority of the Group's assets are held through JSH, including the main, listed subsidiaries: Dairy Farm which runs Cold Storage, Giant, Jason’s Market Place, and Shop’n’Save. , Hongkong Land (HKL), Jardine Cycle & Carriage (JC&C) and Mandarin Oriental. JMH holds various businesses directly: Jardine Pacific and Jardine Motors, both wholly owned, and Jardine Lloyd Thompson (JLT), a listed associate. The main complication is that JSH has a controlling cross-shareholding in JMH of 56%.

To summarise, in my view:

1) this is a rather recession proof counter, with thoroughly diversified businesses thatcovers food, cars and property.

2) Sum of parts is likely more than its whole value, one website on this
http://www.gurufocus.com/news/175836/jar...ry-contest placed this value at $72

3) increasing dividends over the part decade, a clear sign that the company is doing well http://gurufocus.com/images/useruploads/182694177.jpg

4) this counter is a one possible candidate to do dividend compoundation and magnification of effect over the next 1-2decades, that is, if this sort of growth is sustained.

4) This stock seems to be in a correction after hitting a high of US$70 some months ago and it currently trading at US$52

5) This stock is traded in lots of 400 shares, so the smallest amount is around S$27,000.

Any one vested or got views on this counter?

(not vested but looking at it)

[freedom]

The income for the holding company is the dividends from the controlled companies. So the profit may be high, but the cash flow is pretty low.

Better to invest into the good controlled companies than the holding company.

[Nick]

I agree with Freedom here.

I don't think sum of the parts will give the 'true' value as there is always a conglomerate discount given. Plus, if there are no intention to monetize these investments AND hand the cash over to minority investors in the form of dividends, does it really make sense for it trade at real book value ? For instance, HKEX-listed First Pacific owns direct controlling stakes in 4 listed and 1 unlisted company in Indonesia, Singapore and Philippines, yet it trades at around half of its RNAV (based on market value of the listed equities). Does that alone make it a screaming value buy ? I don't think so.

While one can look at the recurring profit attributable to the Group to derive a PE, I think cash-flow to the parent company will be more important. For instance, First Pacific provides a 'Head Office Cash flow Statement' which summarizes the amount of cash-flow the listed head company receives - http://www.firstpacific.com/media/fck/fi...8%2028.pdf [Slide 13] - and how it is being used to finance investments, repay debt and pay dividends. This is far important to potential investors since without the cash, it can't really do much at the 'head' entity level.

On another note, why do you consider the business to be recession proof ?

(Not Vested in either companies)

[chialc88]

I was keen in the Jardine family and decided to take a look few weeks ago.

{side track a bit. at that time,
Blue chip drops so much, but penny stocks was rocket high.
I mentally rehearse that penny stocks must drop followed by two possibilities:
1. blue chip drop further
2. Blue chip recover
}

After looking for a few days, I move in to buy JSH. Later, I sort of regret because it's in USD and the USD exchange rate swayed the ROI quite a fair bit.

<vested in Jardine but not JHM>


A Life not Reflected is a Life not Worth Living.

[gautam]

Hi nick & freedom, thx for ur invaluable inputs. My thinking is 1) recessn proof because pf its supermarkets n powerful 7eleven. I dont think many can pass a single day without using it or its services. 2)the point abt increasing dividends to me is v impt. Cos my purchase price is locked in. N with increasg div, my yield of 3% now, might be 10-20% 10yrs later. Using div to purchase more shares will increase this. 3)sum of parts i agree is not v impt becos actual value unlikely to be unlocked but it does provide downside support.
I think this counter needs a decade or more to yield the most.
Going bust is extremely remote. Imo. Welcome comments.

[Nick]

Hi nick & freedom, thx for ur invaluable inputs. My thinking is 1) recessn proof because pf its supermarkets n powerful 7eleven. I dont think many can pass a single day without using it or its services. 2)the point abt increasing dividends to me is v impt. Cos my purchase price is locked in. N with increasg div, my yield of 3% now, might be 10-20% 10yrs later. Using div to purchase more shares will increase this. 3)sum of parts i agree is not v impt becos actual value unlikely to be unlocked but it does provide downside support.
I think this counter needs a decade or more to yield the most.
Going bust is extremely remote. Imo. Welcome comments.

Thanks for your clarification. Your plan does seem to make sense provided similar level of growth in the past can be maintained in the future. Out of curiosity, regarding point 1, why not just buy Dairy Farm directly ? I think it has a similar yield and increasing dividend history.

(Not Vested)

[gautam]

Hi nick, i agree that dairy farm behaves similarly, just that jmh is more diversified.
In similar vein, giant mcd fits this also.
I agree that past performance cant predict future. But looking at it, i think the likelihood of jmh n mcd to achieve cagr 15-20% over next decade remains high.
For one, giant n 7eleven stores n mcd will continue to increase, with inflatn, prices will only go up. A happy meal or a pack of 30eggs now will most certainly cost more 10yr later.
Though i am not, i am thinking vesting now will provide lockin n high poss of continued of increased div.

[smalkmus]

I was looking thru the Straits Times this morning, the Jardine group of company has fallen a fair bit. My opinion is that it might have been caused by the issues surrounding Tapering and the growth issue around in the region. However, my gut feel is that it can still drop slightly a bit, but at this stage, based on my search on bloomberg. It can prove to be a good buy given the quality of it's business. Not sure if I am making sense in front of the experts in this forum.

[Drizzt]

looking thought the jardine stable of companies one thing that they all largely have are high ROIC. it is especially so for dairy farm.

Keeping a capital base in line with expansion requires superior operations. and that roic looks to be an indication. in fact dairy farm so far superior that their roic is around 40-50%. In the past year, that has fallen off to 33% and from the first half of 18%, seems to indicate that perhaps for the first time in a long time, they require more capex to get that earnings growth.

the same could probably be which is a sign of the more difficult operating scenario.

if you buy them expecting 20% CAGR, you better make sure they can deliver that. to be more sure, the environment needs to be conducive, the management team needs to have that competitive edge there. else, you may just be overpaying.

any way i did some small exercise here

[Image: D6FyxIf.png]

seem to me for the first years the dividend have been in a funk. even in the later years the dividend growth is 15% at most. does show some signs of deceleration.

[Andrewgoh]

looking thought the jardine stable of companies one thing that they all largely have are high ROIC. it is especially so for dairy farm.

Keeping a capital base in line with expansion requires superior operations. and that roic looks to be an indication. in fact dairy farm so far superior that their roic is around 40-50%. In the past year, that has fallen off to 33% and from the first half of 18%, seems to indicate that perhaps for the first time in a long time, they require more capex to get that earnings growth.

the same could probably be which is a sign of the more difficult operating scenario.

if you buy them expecting 20% CAGR, you better make sure they can deliver that. to be more sure, the environment needs to be conducive, the management team needs to have that competitive edge there. else, you may just be overpaying.

any way i did some small exercise here

[Image: D6FyxIf.png]

seem to me for the first years the dividend have been in a funk. even in the later years the dividend growth is 15% at most. does show some signs of deceleration.

heehee morning bros,

the S in the jardine doesnt mean stable la.. its strategic theres quite abit of cross-holding between jsh and jmh.

For the data here, is it on JMH, JSH or Dairy farm? For dairy farm, did you go through some of the corp action inside? Apparently they did quite abit of M&A so there might be alot of adjustment to be done..

http://www.dairyfarmgroup.com/history/history2000.htm

for the sub-holdings of the different Jardine co:

http://www.jardines.com/group-companies/overview.html