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Would Warren Buffett Buy Jardine Strategic Holdings?

Warren Buffett is a fan of conglomerates. We know that to be true because he runs one of the world’s most successful conglomerates, namely Berkshire Hathaway. But what would he make of Jardine Strategic Holdings (SGX: J37), one of Asia’s oldest and, arguably, one of the region’s most successful conglomerates.

Buffett likes businesses with predictable earnings. In the main, Jardine Strategic’s operating income is quite knowable. Over the last five years, profits at the operating level have hovered S$4.2b. The bottom line has been slightly more inconsistent, though not overly erratic. It has been around S$3.4b.

The company’s Net Income Margin has not been especially high. Five years’ ago, it was a respectable 10.5%. But over the last couple of years, the margin has halved to around 5.5%.

The company is reasonably efficient. Asset turnover is a steady 0.6. It implies that the company has been generating S$0.60 for every dollar of asset employed in the business. It has achieved this without excessive use of debt. Jardine Strategic’s Leverage Ratio is an unexceptional 1.5.

The modest use of debt could help explain Jardine Strategic’s low share price volatility. It is only marginally higher than the market.

On balance, Jardine Strategic has many of the attributes that Warren Buffett could find attractive. They may not be the most exciting shares on the market. But then again nor is Buffett’s own investing vehicle, Berkshire Hathaway.

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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 Director David Kuo doesn’t own shares in any companies mentioned.