Posted by: donmihaihai | November 23, 2021

Jardine C & C.

The SE Asia arm of JMH. Jardine C & C is a conglomerate, and its main interest is the 50% ownership of Astra International, one of the biggest listed co. in Indonesia which is also a conglomerate by itself. Beside Astra, there are other substantial interests(10% to >40%) in Vinamilk, Thaco, REE, SCC and PT Tunas and direct motor (distribution/ retail of motor in Singapore and Malaysia). Thaco and REE are conglomerate as well. Yes, I exclude Gojek that held by Astra.

Key points 1) Other than direct motor, Jardine does not run Vinamilk, Thaco, REE, SCC and PT Tunas. Astra look like a mixed. 2) Interests in these companies are purchased by Jardine C & C over the years with some over 20 years. In short, Jardine C & C make concentrated investment in companies with a long-term view and let the management run the business as they deemed fit with some or little inputs.

How should I evaluate Jardine C&C?  How well these companies will perform over long term and the prices which Jardine C & C paid for them. From the look of it, these companies range from decent to excellent, so I expect Jardine C & C ROE to move closer to investees blended ROE over a longer period. i.e higher ROE.

To protect Jardine C & C, these investees must run their co. with sound financials so that the kids won’t go to parent asking for money, especially during bad times. To protect itself and investees, Jardine C & C must do the same, sound financials. But I think, Jardine C & C has push this responsible to JMH. From JMH point of view, it is ok or even desirable since Jardine C & C is also a listed co.

The cashflow of Jardine C & C is consist of mainly cash dividend out by investees plus direct motor. Thereafter, Jardine C & C dividend out almost all its received cash. So, to take sizable investment in current or new investee, money must be raised. Minority shareholders will need to share their proportional responsibility with JMH.

Conglomerate discount. Almost never heard that Jardine C & C is being labelled as such. Its share price was always trading at I would say a premium until recently. Who know, Conglomerate discount might follow Jardine C & C from now on if share price continues to disappoint. The opposite is true as in when times is good, even conglomerate trade at a premium.

At SGD23, Jardine C & C has a market Cap of about USD6.7B. Astra has a BV and market cap of USD11.6B and USD17.6B respectively. With 50% interest, Jardine C & C share will be USD5.8B and USD8.8B. Basically, if you are interested in Astra because the share price is trading at fair value or undervalue, it is cheaper to buy Jardine C & C.  

The next question will be what about is the value of Vinamilk, Thaco, REE, SCC, PT Tunas and direct motor. They are of decent size and the carry value of Vinamilk, Thaco and SCC is already about USD2B, add REE and PT Tunas will give a carry value of USD2B to USD3B. Less Jardine C&C holding level debts, will still be USD1B to USD2B. That is about or close to 1/3 the size of Astra. 

The future of Jardine C & C will depend on these names. Astra, Vinamilk. Thaco, REE, SCC and PT Tunas and potential new name. JMH set to benefit the most and Jardine C & C does not need to stay listed. 


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