Would Benjamin Graham Buy Jardine Cycle & Carriage?

Around one in every S$8 spent on buying a car in Singapore is rung up in the tills of Jardine Cycle & Carriage (SGX: C07). The company is also the majority owner of Astra International which is Indonesia’s largest automotive producer and distributor. The Indonesian conglomerate accounts for more than 90% of Jardine C&C’s profits.

Currently trading at 12.6 times earnings, Jardine Cycle & Carriage is less expensive than the market average. The Straits Times Index (SGX: ^STI) is currently priced at around 14 times earnings. However, this measure alone does not quite tell the full story.

The P/E ratio over the last five years appears to show that the current earnings multiple is not really that cheap. As recently as last year, Jardine C&C has been valued as low as 10 times earnings. The P/E ratio was below five in 2009.

The earnings yield is 8%. Meanwhile, the dividend yield is 3%, which is only marginally better than the risk-free return of 2.4%. On that measure, Jardine C&C would need some strong fundamentals elsewhere to attract value investors.

But with a Price-to-Book ratio of 2.5, there is little in the way of a margin of error for investors. A relatively low current ratio of 1.2, which is some way below the ideal value of two, is far from perfect too.

Worryingly, the bottom line has barely grown over the last few years. Whilst Astra’s contribution to net income has been promising, the profits could be considered less reliable, since they are exposed to currency risk.

It would seem that Jardine Cycle & Carriage currently does not tick enough of the boxes that a value investor would like. Investors of other disciplines might disagree, though.

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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 Adam Kuo doesn’t own shares in any companies mentioned.