12 things to know about Jardine Matheson before you invest

Jardine Matheson Holdings Limited (SGX: J36) is a conglomerate with multiple business interests located across the Asia-Pacific. Presently, it derives income from the following subsidiaries:

  • 100% shareholding of Jardine Pacific
  • 100% shareholding of Jardine Motors
  • 84% shareholding of Jardine Strategic (SGX: J37)

As I write, Jardine Matheson is amongst the top 30 constituents of the Straits Times Index and is worth US$23.6 billion in market capitalization. For this article, I’ll bring an overview of each of Jardine Matheson’s subsidiaries over the last 10 years, the group’s financial results, and provide an update on its newest acquisitions made in 2017 and 2018.

Here are 12 things you need to know about Jardine Matheson before you invest.

Main subsidiaries

1. Jardine Pacific owns a portfolio of businesses which are involved in engineering, construction, restaurants, and airport services under key companies like Jardine Engineering Corporation, Hong Kong Air Cargo Terminals, Jardine Restaurant Group, Jardine Schindler Group, and Gammon Construction. In 2011, Jardine Pacific increased its stake in Pizza Hut Vietnam and acquired certain IT distribution businesses of SiS International Holdings. This contributed to a substantial jump in revenues from US$1.29 billion in 2010 to US$2.66 billion in 2011. Since then, its revenues had dipped marginally to US$2.39 billion in 2017.

Source: Annual Reports of Jardine Matheson

2. Jardine Motors operates motor vehicle dealerships and services in the UK, Hong Kong, Macau, and mainland China. Jardine Motors carries a portfolio of brands which include Mercedes-Benz, Porsche, Land Rover, Jaguar, Volkswagen, Aston Martin, BMW, and Audi. It has achieved a CAGR of 8.42% in revenues, increasing from US$2.68 billion in 2008 to US$5.54 billion in 2017.

Source: Annual Reports of Jardine Matheson

3. From its interest in Jardine Strategic, Jardine Matheson has effective stakes in the following subsidiaries:

  • 42% shareholding in Hongkong Land (SGX: H78)
  • 65% shareholding in Dairy Farm International (SGX: D01)
  • 65% shareholding in Mandarin Oriental International (SGX: M04)
  • 63% shareholding in Jardine Cycle & Carriage (SGX: C07)

4. From its interest in Jardine Cycle & Carriage, Jardine Matheson has effective 32% stake in P.T. Astra International Tbk, a conglomerate listed in Indonesia which has a diverse business interests that include automotive, financial services, heavy equipment, mining and oil palm plantations in the following companies:

  • 31.9% shareholding of PT Astra Daihatsu Motor
  • 50.0% shareholding of PT Toyota-Astra Motor
  • 50.0% shareholding of PT Isuzu Astra Motor Indonesia
  • 50.0% shareholding of PT Astra Honda Motor
  • 44.6% shareholding of Permata Bank
  • 59.5% shareholding of United Tractors
  • 80.1% shareholding of Suprabari Mapanindo Mineral
  • 79.7% shareholding of Astra Agro Lestari

5. Jardine Strategic has recorded rapid growth in revenue from US$18.5 billion in 2008 to US$33.1 billion in 2012. Subsequently, its sales dipped marginally to just below the US$30 billion mark in 2015 and 2016 before making a comeback to US$31.6 billion in 2017. Overall, Jardine Strategic’s revenues remained flat from 2012 to 2017. This is mainly due to weaker performances by Astra International which cancelled out growth in sales achieved by Dairy Farm International and Hongkong Land during the five-year period. Its poor performance was mainly caused by a drop in sales volume for motor vehicles and Komatsu tractors in Indonesia, particularly in 2015 and 2016.

Source: Annual Reports of Jardine Strategic

Group financials

6. Jardine Matheson shares a similar revenue profile with Jardine Strategic above, simply because Jardine Strategic remains the largest revenue contributor to Jardine Matheson. Revenues grew rapidly from US$22.4 billion in 2008 to US$39.6 billion in 2012 before flattening around US$37-40 billion from 2013 to 2017. The negative impact from lower sales at Astra International was smaller for shareholders of Jardine Matheson than Jardine Strategic. This is because sales growth achieved by Jardine Motors offset the lower sales from Astra International during the period.

Source: Annual Reports of Jardine Matheson

7. Jardine Matheson has increased its underlying profits by a CAGR of 7.44% over the last 10 years, from US$822 million in 2008 to US$1.57 billion in 2017. The conglomerate recorded lower profits in 2015 and 2016 due to a drop in Astra International’s profits in those two years. Apart from lower motor vehicle and tractor sales, the Indonesia-based company was also impacted by its 44.6% stake in Permata Bank when the bank recorded a massive drop in profit in 2015 and a substantial loss in 2016 as a result of higher loan-loss provisions in these two years.

Source: Annual Reports of Jardine Matheson

8. From 2008 to 2017, Jardine Matheson generated US$24.4 billion in cash flows from operations. It received US$6.7 billion in dividends from its investments in associates and joint venture companies. It also raised US$6.4 billion in net long-term debt. From its cash flow, it has spent a total of:

  • US$9.1 billion in net purchases of tangible assets
  • US$2.2 billion in net acquisitions of subsidiary companies
  • US$5.3 billion in net acquisitions of associates & joint venture companies
  • US$2.0 billion in net acquisitions of investment properties
  • US$1.5 billion in net acquisitions of other investments
  • US$2.7 billion in dividend payments to shareholders

Jardine Matheson has increased its cash reserves from US$2.2 billion in 2008 to US$6.0 billion in 2017. Its debt-to-total equity ratio is 0.147. In short, Jardine Matheson is a conglomerate which is highly capable of generating cash flows from its portfolio of businesses to expand its mammoth business empire and reward its shareholders with growing dividends.

Source: Annual Reports of Jardine Matheson

9. Jardine Matheson achieved a CAGR of 8.78% in dividend per share (DPS) over the last 10 years. DPS increased from US$0.75 a share in 2008 to US$1.60 in 2017. Based on its latest DPS and share price of US$64.27 as at 16 July 2018, Jardine Matheson’s current yield is 2.5%.

Source: Annual Reports of Jardine Matheson

2017/18 acquisitions

10. Jardine Strategic (of which Jardine Matheson has an 84% stake) acquired a 28% stake in Greatview Aseptic Packaging Company Limited in June 2017. Greatview is the second largest supplier of aseptic carton packaging in China and the third largest globally. Overall, Greatview has achieved growth in profits from RMB 279.7 million in 2014 to RMB 343.3 million in 2017.

Source: 2017 Annual Report of Greatview Aseptic Packaging Company

11. Jardine Cycle & Carriage (of which Jardine Matheson has a 63% stake) acquired a 10% stake in Vietnam Dairy Products Joint Stock Company (Vinamilk) for US$1.15 billion in November 2017. Founded in 1976, Vinamilk is the leading dairy producer in Vietnam with a 58% market share of the liquid milk market in the country. Vinamilk operates a total of 13 dairy factories, owns 10 farms, and has a distribution network of over 240,000 retailers across Vietnam. Overall, Vinamilk achieved growth in profits from VND5.8 trillion in 2012 to VND10.3 trillion in 2017.

Source: 2017 Annual Report of Vinamilk

12. Dairy Farm International (of which Jardine Matheson has a 65% stake) acquired a 18.25% stake in Robinsons Retail Holdings, Inc — one of the largest multi-format retailers in the Philippines — for US$520 million in March 2018. As of 2017, Robinsons operated 1,718 retail stores, including 154 supermarkets in the Philippines. In addition, it owns a 40% stake in Robinsons Bank, among the fastest growing banks in the Philippines. Overall, Robinsons has achieved steady growth in profits, from PHP2,745 million in 2013 to PHP4,978 million in 2017.

Source: Annual Reports of Robinsons Retail Holdings Inc.

The fifth perspective

In summary, Jardine Matheson has pursued organic growth and investments in strategic companies that are market leaders across the Asia-Pacific over the past 10 years. Except for a ‘glitch’ in Astra International, its remaining portfolio of businesses have delivered a strong set of financial results and enabled Jardine Matheson to pay growing dividends to investors over the last 10 years.

Based on their latest investments, it seems to me that the investment strategy employed by Jardine Matheson is one that resembles Berkshire Hathaway. This is evident as Greatview, Vinamilk, and Robinsons are companies that possess relatively stable business models, are market leaders in their respective fields, and have built an impressive track record for growing profits consistently. With a healthy balance sheet and continued prudent investments made, Jardine Matheson is in a position to sustain growth in profits over the long term.

Ian Tai is the founder of Bursa King, a data platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that helps investors unearth consistently profitable stocks from a database of over 900+ stocks listed in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

2 Comments

  1. Kim Lang

    July 19, 2018 at 10:37 am

    Seems Singapore is the hub for investment as I can see various investment opportunities. Thanks for sharing.

    • Ian Tai

      July 19, 2018 at 12:25 pm

      Yes, it is. Singapore is a financial hub. Keep exploring. You might bump into something good. 🙂 Ian.

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