Jardine Cycle & Carriage

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27 Apr 2020 C&C released a interim Management Statement for 1Q20.
https://links.sgx.com/FileOpen/JCC1Q20_I...eID=608138
(click for details)

"... within Astra, despite solid performances in its automotive and financial services businesses, and a higher contribution from the group’s

agribusiness, overall performance declined in the first quarter of the year, largely due to lower coal prices and weakening consumer confidence. However, as the impact of COVID-19 has grown more severe and anti-pandemic measures have taken effect, the group has faced increasingly difficult conditions and its April performance has been adversely impacted. These conditions are likely to persist for some time. "

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27 Apr 2020 Astra 1Q financial statement:
https://links.sgx.com/FileOpen/Astra_202...eID=608124
(click to read SGX announcement)
Highlights
 Net earnings per share down 8%
 Car sales down 3% and motorcycle sales down 5% but market shares increase
 Lower coal prices impact heavy equipment sales and mining contracting volumes
 Agribusiness benefits from higher crude palm oil prices 

During this critical period, let's do our part by staying home and take care of one another.

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27 Apr 2020 C&C published a interim management statement for 1Q20.

I should had see it coming... 
28 Apr 2020 all the Jardine company published their interim management statement too

Here it is:
JMH
JSH
JCC
HK Land
Dairy Farm

Stay safe and stay healthy, everyone.

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1st May 2020 C&C announced USD69cents dividend xd 8 June 2020 option 1 usd, option 2 sgd
Electronic AGM 22 May 2020 at 11:30am

(click to pre-register b4 19 May 11:30am)
Shareholders can choose either listerning or joining webcast.

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20 May 2020 Jardine C&C update prior to eAGM
(click for sgx announcement)

Date/time: 22 May 2020 11:30am
 (tomorrow)

Q&A was also published
(click for details)

Valuebuddies, take note of Question #2:
2. Given the current economic conditions, will JC&C need to do a rights issue to strengthen its balance sheet or for future M&A opportunities?
As at 31 December 2019, the JC&C holding company’s net debt was around US$1.5 billion. We have previously stated that our intention is to complete a rights issue to reduce the holding company’s debt level. This continues to be our plan. We will review the appropriate timing for a possible rights issue to deleverage in a financially prudent manner.

Take note that Bank Permata divestment is completed.
Gain on disposal: USD 385m
NTA/share  from USD14.67 increase to USD15.21
EPS from USD2.23 increase to USD2.80
(click for divestment details)


Stay home and stay safe, everyone.

[Bibi]

2. Given the current economic conditions, will JC&C need to do a rights issue to strengthen its balance sheet or for future M&A opportunities?
As at 31 December 2019, the JC&C holding company’s net debt was around US$1.5 billion. We have previously stated that our intention is to complete a rights issue to reduce the holding company’s debt level. This continues to be our plan. We will review the appropriate timing for a possible rights issue to deleverage in a financially prudent manner.

Does anyone knows when did they state their intention to complete a rights issue? I do follow their announcements released in SGX but i dont recall any mention of this rights issue in those announcements. Although I know its just a matter of time they have to reduce their debts.

Vested

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9 June 2020 NOM eAGM C&C
https://links.sgx.com/FileOpen/AGM%20202...eID=617037
"JC&C Group announced in its interim management statement in April that trading conditions were challenging in the first quarter. The situation worsened in April and May with the temporary closures of many of the Group’s operations. Both business and consumer sentiment were expected to remain weak for some time and the Group’s performance was expected to be significantly impacted. The Company was carefully monitoring the debt level and liquidity positions of its businesses, and working with them to undertake action plans including refinancing, reducing capital expenditure and managing working capital and costs, and preserving cash. He reiterated that these were challenging times but the Company took a long-term approach to investments and remained focused on the Group’s long-term strategy and prospects."

Stay home and stay safe, valuebuddies.

[dzwm87]

It's true that Astra has continued to be the market leader but I am not too sure of their earnings growth. Look at the past 5 years, their automotive division is a cash cow at best albeit a declining one. Management has also fared poorly in terms of allocating those cash. They expanded into infrastructure, bought a construction company, invested in GoJek, etc. The first two have been lackluster while there is barely any synergies from their GoJek investment.

I think you are also missing the currency impact. In my opinion, JCNC is likely going to be an undervalued play; meaning the investor hopes the market will pay back a certain multiple. Their expansion into Vietnam is interesting but for now, is too small to offset any decline coming from Astra.

Since we are on the subject of Indonesia automotive industry, may I touch on Astra as a peer to peer comparison to Mitra Pinasthika Mustika?

Just to add more colors, Astra is BOTH a manufacturer/assembler AND distributer/dealer of all the vehicle brands in Indonesia listed below:
- Honda Motorcycle
- Toyota
- Daihatsu
- Lexus
- BMW
- Peugeot
- Isuzu
- UD Trucks

Astra commands a staggering market share of 52% for passenger cars and 76% for motorcycles. In Indonesia, almost half of the cars on road you will see are "Made in Indonesia" Toyota and Daihatsu (poor man's Toyota) SUV or MPV. On the other hand, Honda motorcycles are so ubiquitous that Indonesians actually refer and call all motorcycles as "Honda". 

Apart from the practical reasons why Toyota-Daihatsu cars and Honda motorcycles are so popular, is Indonesians' strong sense of national pride. It is almost like Malaysian-Proton relationship. Indonesians believe that these vehicles, made by their very own people, are definitely road-worthy and good enough. Having sat in Toyota and Daihatsu cars numerous times, I have to concur with them. 

In my opinion, it is hard to see Indonesians ditch their loyalty to Toyota-Daihatsu cars and Honda motorcycles en masse for the foreseeable future. As long as Astra don't screw up, there will be money to be made. Astra is involved in the production, distribution, retail, financing, after sales service, manufacturing and retailing of spare parts. They are the biggest player by far and enjoy the competitive advantage of economic of scale. I don't see Astra's strong moat in automotive business eroding in the near term. 

Astra contributes 80% of Jardine Cycle and Carriage underlying profit, 45% comes directly from the Indonesia automotive business. The rising middle class of 260 million Indonesians should bode well for Astra if investors take a long term view.

Jardine Cycle and Carriage has a weak balance sheet. Management recently has raised the possibility of a rights issue. However, with sale of Permata Bank, Astra will net in US$1.13 billion. This should buy them some time to weather the Covid storm. 

Disclaimer: I have bought both Jardine Cycle and Carriage, and Jardine Matheson shares recently. Not an inducement to buy or trade.

[jfc18]

Hi dzwm87 VB,

For the investment of a construction company, there is synergy for their Heavy Machine business which they are the sole distributor of Komatsu heavy construction equipments. 

For the investment into Infrastructure, it is mainly in the development and management of toll roads. Again, there's synergy for their Construction, Heavy Machine and automotive businesses.

For the investment in GoJek, the joint venture has resulted in Go-Car, which operates a fleet of several thousand cars from Astra. The synergy is quite clear on this. I am not too sure how Astra's investment of US$250m in GoJek will turn out. However, many investors have believed in the potential of GoJek and its Super App which has intertwined with the living habits of many Indonesians now. Temasek, Google, Tencent, JD.com, Visa, Capital Group, KKR, Warburg Pincus are some of the many heavyweights backing GoJek. Facebook and PayPal has just recently join in the fray a few weeks ago.

Personally, I do feel JCNC is undervalued at the moment. They have invested in S.E.A market leaders in their respective field thou I feel they have overpaid for Siam City Cement which gives JCNC an ROI of 4% based on SCC latest net profit and the price JCNC paid a few years ago. Their ventures in Vietnam should yield a brighter outcome. THACO, REEC and Vinamilk are blue chips of Vietnam and a direct play on its growing emerging class. 

JCNC underlying EPS for past three years
2017: $2.68
2018: $2.92
2019: $2.98 ($1.178 Billion)


JCNC Dividends
2017: $1.18
2018: $1.17
2019: $1.17

JCNC NAV
2017: $21.68
2018: $21.23
2019: $23.39

JCNC ROE
2017: 14%
2018: 15%
2019: 14%

JCNC share price is in the mid $16 to $21 range for the past 3 months. If an investor takes a long term view and look past the Covid crisis, buys JCNC at $20 or below, you will be getting an Earning Yield of 15% (PE 6.7x) and Dividend Yield of 5.85%. All these at below Book Value and ROE of 14-15% for a company whose underlying profit exceeded $1 Billion for the past three years. Rather attractive valuations to invest alongside with the Jardines Taipan, I say.

[weijian]

I see JCC as an octopus in Indonesia. Its individual tentacles don't have much synergies between each other. There is generally more synergies between suckers (the suction cups) in each tentacle instead. Examples include going full stream for its oil palm business (FFB upstream to refinery) or United Tractors that supply and finance heavy equipment to miners/construction, but at the same time, also does some coal mining itself and overburden removal (clearing up the mines after digging them).

The more interesting synergies for Astra (as in between tentacles) probably come from the Automotive and Financial services departments where you get a 1 stop service from buy-finance-insure-repair. When it was still owning Permata Bank, it went into life insurance and probably we could expect some sort of ban insurance agreement between both? As for the investment in Gojek, I see it as some sort of insurance policy against creative destruction. From the history of the rise and fall of corporations, any business school grads are already very well-versed to guard against creative destruction now. It is not providing too much synergies per say.

The bets into Myanmar and Vietnam, are probably reminiscent of JCC's initial purchase in Astra (2000 and then from 2003-2005 via rights/additional share subscriptions). It is abeit to buying a ticket for a future lottery.

At current prices, I would view JCC more as a value buy (backed by its varied businesses) and holding onto a call option (lottery ticket)

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29 July 2020 Astra result as at 30 Jun 2020
https://links.sgx.com/FileOpen/Astra_202...eID=625488

“The COVID-19 pandemic has had a significant adverse impact on Astra’s businesses and its financial results, especially in the second quarter. The pandemic containment measures implemented across most of the country have caused severe disruption to the Group’s operations, including the temporary closure of its automotive manufacturing and distribution operations, and there was also a significant rise in the number of restructured loans in its financial services businesses. In addition, depressed coal prices led to a deterioration in its heavy equipment, mining contracting and mining businesses. The pandemic, and the measures taken to contain it, are expected to continue to adversely affect results for the rest of this year.
During this challenging period of business disruption and uncertainty, the Group has put a particular focus on reducing its operational and capital expenditure, managing its working capital and ensuring liquidity. The Group’s balance sheet remains strong, with Rp38.6 trillion of available committed credit facilities."

Wear mask and keep your social distance, everyone