Since I have recently purchased some shares of Jardine Matheson, what better time to write about the company.
The Jardine group is indeed a complex web of companies with Jardin Matheson owning part of Jardine Strategic and vice versa. This structure was purposefully formed to prevent adverse takeovers something which the group was subject to previously.
I shall not dwell too much about the company's long history or further corporate complexities as it is simply too long and complicated to elaborate here. I will just share 3 points that helped make my decision to take a tiny stake in the company.
1. Valuation
- The current valuations for the company all look within range and are values that I am comfortable with paying for. P/E is around 12x and P/B is around 1.1x, both of which are reasonable levels for me.
- The price has also dropped around 15% since the beginning of the year, which also makes this a relatively discounted price for me.
2. Business Model
- The group has a diverse range of businesses. Again I like the fact that when I buy this company I have access to Astra, Dairy Farm, HK Land, Jardine Lloyd Thompson, Cycle and Carriage, etc. These are all great businesses in which alot of us have a good deal of exposure to both on a regular and long term basis.
3. Cashflow US$
- The company has grown its dividends steadily over time and these will be in US$. With the eventual rise of interest rates in the US$, we should expect to see a nice headwind in terms of dollar strength. This gives me a nice potential FX kicker for future cash flows (dividend and capital gains) which will be in USD and translated into SGD at potential higher values.
There definitely were some concerns that I had with regards to the investment. The group is quite tightly held by the Keswick family so alot of its fortunes are tied to the ability of the family to grow the large and complex group of businesses. There is also the FX exposure in US$ which may go against me in future in the unlikely scenario that my hypothesis about future FX rates is incorrect.
Nevertheless, I like the company and its potential enough to take this initial position. I'm really glad to have bought into this stock and I hope I can add on more in future.
Also, I've decided to stick to just the 8 companies that I own at the monent and just continue to add unto those for the forseeable future.
Remember it's the quality and not quantity that counts!
Nevertheless, I like the company and its potential enough to take this initial position. I'm really glad to have bought into this stock and I hope I can add on more in future.
Also, I've decided to stick to just the 8 companies that I own at the monent and just continue to add unto those for the forseeable future.
Remember it's the quality and not quantity that counts!
Signing Off
Transitioning Stock Investor
Hi,
ReplyDeleteMost of Jardine Matheson Holdings' (JMH) revenue, assets and profit comes from or are in South east Asia and Greater China, so the strengthening (or weakening) of the US$ should not make a large difference in profit or share price. (please correct me if I'm wrong on this) But it's still a good share with ample diversification and at a moderate P/E ratio, but its more exposed to Asia than it is to the Western hemisphere.
From
Just Some Thoughts
Thanks for your comments! Fully agreed so its important to reiterate the context of my comments. It was purely with reference to the fact that the stock is denom. In USD and that my stock holdings and dividends will be in USD and me being comfortable with taking on that FX exposure and does not refer at all to the underlying business/geographical exposure of the company. :)
ReplyDeleteKeep those comments coming in!
Hi..... just some further thoughts, have you ever considered JSH? the corporate structure would make one spin, as JSH and JMH are both holding company and subsidiary of each other.
ReplyDeleteHi dsea
ReplyDeleteI did think of it before, but decided to stick with the holding company JMH (although they kind of own each other). I also prefer some of the more direct exposure to certain businesses that JMH offers vs JSH (eg. JLT).