Would Benjamin Graham Buy Jardine Strategic Holdings Limited?

Jardine Strategic Holdings Limited (SGX: J37) is part of Jardine Matheson Holdings (SGX: J36). It holds shares in various parts of the Jardine family of companies.

Its interests include Hongkong Land (SGX: H78), Dairy Farm (SGX: D01), Mandarin Oriental (SGX: M04), Jardine Cycle & Carriage (SGX: C07), Astra International and Jardine Matheson Holdings (SGX: J36) itself.

This means that Jardine Strategic effectively owns shares in its corporate parent. The reasons for this are manifold. But it can provide a stable structure that helps maintain order within the Jardine group of companies.

Whilst Jardine Strategic does not engage in any business itself, through its subsidiaries it can be considered to be involved in almost everything from financial services to mining.

The performance of Jardine Strategic therefore hinges on the performance of its subsidiaries. The earnings yield of Jardine Strategic is 8.1% but investors only receive a dividend yield of 0.7%. Those in search of a higher dividend yield could be better off looking at its subsidiaries: Jardine Cycle and Carriage yields around 3.2%, whilst Mandarin Oriental rewards investors with a yield of about 4.1%.

One thing in favour of Jardine Strategic is that it can be looked at as a “reasonably safe” investment. The total debt of the company is only a quarter of its book value. The current ratio of 1.4 is not as high as value investors would like. But with a steady income stream and net current assets of over S$20b there does not appear to be too many reasons to worry.

It is also priced slightly below its book value, which is always a positive for value hunters.

Perhaps the main attraction of Jardine Strategic is that it owns stakes in companies that cover a broad spectrum of industries. It is unlikely that they will all have good years at the same time. But a diversified portfolio of interests could help smooth out the highs and the lows.

As a value share, Jardine Strategic does not quite stand up to scrutiny. However, the total return over the last 10 years cannot be ignored – it is in the mid-twenties. This is certainly something to take note of, even if it might not interest followers of Benjamin Graham.

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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.