The Motley Fool

Can Jardine Matheson Holdings Be A Value Share?

Jardine Matheson Holdings Limited (SGX: J36) is a complex beast in terms of its ownership making it a headache for any single investor looking to obtain a large stake in it.

However, if we ignore this fact and look at the company’s fundamentals what can we make of it as a value share?

Through its subsidiaries, Jardine Matheson Holdings Limited is involved in almost every industry you can think of from restaurants and luxury hotels to the operation of air cargo terminals.

These same subsidiaries have helped Jardine experience growing top-line revenues over the last few years that have translated into an earnings yield of 7.2%. This is around 3-1/2 times the risk free rate of return of 2%.

However, despite the growing top line, the net income has been falling steadily and in 2014 stood at around half the value of three years earlier.

Whilst net income has been falling the company has still managed to grow its dividend payout. The current dividend yield of 2.3% is only slightly above the risk free rate. It has also come at the expense of a three-fold increase in the pay-out ratio.

How sustainable this dividend yield is can be determined by examining the company’s balance sheet. The current ratio has stood fairly constant around 1.4. What this means is that the company has more than enough in the way off current assets to meet its current liabilities.

Despite the somewhat unconvincing results Jardine Matheson has still seen its share price rise steadily. Since 2011 the stock price has risen from just below S$60 a share to its current price of S$86. This prices the company at 1.23 times its book value.

It is hard to paint a picture of Jardine Matheson Holdings as a value share. However, its healthy balance sheet and ability to reward investors with a decent dividend yield will certainly conjure up interest from some quarters.

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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.