Jardine Matheson Holdings? (SGX: J36) performance over the past ten years has probably been the envy of most investors. Since the start of 2003, it has returned 1,015% (inclusive of dividends), handily beating the Straits Times Index?s (SGX: ^STI) 143% increase.
The company?s past history of strong performance would likely have piqued some investors? interest in finding out more about what the company does. Unfortunately, JMH is not the easiest company to unravel.
For starters, here?s the company?s description of its business activities from its 2012 Annual Report:
?The interests include Jardine Pacific, Jardine…
Jardine Matheson Holdings’ (SGX: J36) performance over the past ten years has probably been the envy of most investors. Since the start of 2003, it has returned 1,015% (inclusive of dividends), handily beating the Straits Times Index’s (SGX: ^STI) 143% increase.
The company’s past history of strong performance would likely have piqued some investors’ interest in finding out more about what the company does. Unfortunately, JMH is not the easiest company to unravel.
For starters, here’s the company’s description of its business activities from its 2012 Annual Report:
“The [company’s] interests include Jardine Pacific, Jardine Motors, Jardine Lloyd Thompson, Hongkong Land (SGX: H78), Dairy Farm (SGX: D01), Mandarin Oriental (SGX: M04), Jardine Cycle & Carriage (SGX: C07) and Astra International.”
It goes on to say:
“These companies are leaders in the fields of engineering and construction, transport services, insurance broking, property investment and development, retailing, restaurants, luxury hotels, motor vehicles and related activities, financial services, heavy equipment, mining and agribusiness.”
That is a very long list of companies that are involved in very different industries
In a bid to find out more about what makes JMH tick, I looked into its annual reports to pull out some important figures that I’ll present shortly. But first, here’s a brief primer of what JMH’s various companies are involved in.
- Jardine Pacific: Has interests in engineering & construction, transport services, restaurants, and IT services.
- Jardine Motors: Involved in the sales of motor vehicles and related activities.
- Jardine Lloyd Thompson: Provides insurance, employee benefits-related advice and brokerage services.
- Hongkong Land: Commercial and residential property developer and owner in Asia.
- Dairy Farm: Retailer with over 5,600 outlets spread over Asia. Operates supermarkets, hypermarkets, convenience stores and home furnishing stores among others.
- Mandarin Oriental: Luxury hotel and resort operator.
- Jardine Cycle & Carriage: Has motor interests in Southeast Asia and owns 50% of Astra International.
- Astra International: Indonesian conglomerate with interests in automobile sales, financial services (provides financing for customers looking to buy vehicles from its automobile business), insurance, banking, heavy equipment & mining, oil palm plantations, infrastructure & logistics, and information technology.
Important Revenue Drivers
The chart below shows the revenue make-up for JMH in terms of the various companies that it has an interest in.
This chart shows that the two companies that contribute the most to JMH’s top-line are Dairy Farm and Astra. Was that a surprise to you?
Important Profit Drivers
According to JMH’s annual report, the company focuses on the metric known as ‘underlying profit’ as it gives management a clearer picture of the performances of its on-going business. The reported earnings figures include profits or losses stemming from ‘non-trading items’ which are mostly of a non-recurring nature and ‘underlying profit’ strips that away.
Let’s take a look at the chart below to see how JMH’s underlying profit has changed over the years.
The Underlying-Profit-chart shows that Astra and Dairy Farm has been gaining significance in JMH’s overall profit performance. As the bulk of Astra’s business activities are concentrated in Indonesia, investors in JMH would likely have to pay attention to what is happening at Singapore’s southern neighbour.
Where does the business come from?
Given the wide scope of JMH’s business activities, it also makes sense for investors to want to know where all these business comes from. Here’s a geographical breakdown of its revenue segments:
As seen from the chart, South-East Asia is where the bulk of JMH’s customers come from. That could suggest untapped global opportunities, considering how revenue from Greater China is only around a third of South-East Asia’s.
This breakdown of JMH’s various business activities is useful for understanding what it does but by no means does it cover the complexities involved with all of the company’s moving parts.
That said, JMH might yet prove to be a bargain for investors willing to devote the time and effort needed to understand it. After all, it must have done plenty of things right to deliver those market-beating returns.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.