An Investor’s Cheat Sheet: Jardine Matheson Holdings Limited

A ground-breaking change happened in Singapore’s stock market earlier this January when bourse operator Singapore Exchange Limited (SGX: S68) officially decreased the trading board lot size from 1,000 units to 100.

After the change happened, interest in some of the higher-priced stocks in Singapore started increasing amongst investors.

This was made apparent when Singapore Exchange commented in its latest earnings release that trading activity amongst retail investors in the stocks that make up the Straits Times Index (SGX: ^STI) had increased since the reduction of the board lot size. (Stocks that are part of the index generally carry higher share prices).

One of the Straits Times Index’s components that had been hard to reach for most retail investors previously would be the conglomerate, Jardine Matheson Holdings Limited (SGX: J36).

With its current share price of US$51.80, an investment into Jardine Matheson under the old lot size rules would have set an individual investor back by tens of thousands of dollars. With the new lot size however, a stake in the company can be bought for a minimum of a much smaller US$5,200.

But just because it’s easier to buy shares of Jardine Matheson now does not mean we should be buying. We first have to understand its business.

Given its conglomerate structure, there are many moving parts to the equation which may make the workings of the firm harder to grasp. To help with understanding the company, here are all of Jardine Matheson’s important parts:

  1. Jardine Strategic Holdings Limited (SGX: J37) – The largest investment that Jardine Matheson has is its 82% stake (all ownership-stakes data hereafter are as of 11 March 2015) in Jardine Strategic. Interestingly, the latter’s a conglomerate itself and owns controlling stakes in many other companies, some of which are also listed in Singapore’s stock market.
  2. Hongkong Land Holdings Limited (SGX: H78) is an owner (either full or partial) of prime commercial and retail properties in Hong Kong and Singapore. Some of the properties in Singapore that’s under its banner include One Raffles Quay and Marina Bay Financial Centre. In addition, Hongkong Land also engages in the development of high-end residential real estate in many parts of Asia. The company’s 50%-owned by Jardine Strategic.
  3. Dairy Farm International Holdings Ltd (SGX: D01), which is 78%-owned by Jardine Strategic, is a pan-Asian retailer with more than 6,400 outlets in the region. The company runs supermarkets, hypermarkets, convenience stores, health & beauty stores, restaurants and more. Some of the firm’s retail stores include Mannings, Giant, Cold Storage, and Guardian.
  4. With 73% of its shares owned by Jardine Strategic, Mandarin Oriental International Limited (SGX: M04) is a hospitality outfit with a portfolio of 44 hotels and resorts worldwide.
  5. Jardine Cycle & Carriage Ltd (SGX: C07), which is a conglomerate itself, has 74% of its shares sitting in Jardine Strategic’s vault. Jardine C&C derives its conglomerate status from its ownership stake of just over 50% in one of Indonesia’s largest companies, Astra. The firm counts itself as Indonesia’s largest automotive group and has business interests in oil palm, banking, mining, heavy equipment, and more.
  6. Other businesses – Jardine Matheson also owns 100% stakes in Jardine Pacific Limited and Jardine Motors Group. The former’s a collection of businesses in construction, transport services, restaurants, and IT services. Meanwhile, the latter’s in the business of motor vehicle sales in Hong Kong, Macau, the U.S., and Southern China. Finally, Jardine Matheson also holds a 42% share of Jardine Lloyd Thompson, a London-based insurance outifit.

Making sense of it all

With all that said, here’s something very important we should know. Earlier, I mentioned that Jardine Matheson holds an 82% stake in Jardine Strategic. But confusingly, Jardine Strategic also owns 56% of Jardine Matheson.

This complex cross-holding can prove to be a massive headache for anyone who’s trying to weave apart the intricacies. But what’s crucial here is that investors keep an eye on the deemed interests that Jardine Matheson has in all the companies mentioned above. Here’s the list of companies again, with Jardine Matheson’s deemed interest given in parentheses:

  1. Hongkong Land (41%)
  2. Dairy Farm (64%)
  3. Mandarin Oriental (61%)
  4. Jardine Cycle & Carriage (61%)
  5. Astra International (31%)
  6. Jardine Pacific (100%)
  7. Jardine Motors (100%)
  8. Jardine Lloyd Thompson (42%)

A focus on Jardine Matheson’s deemed interests might be a simpler way to understand the sprawling conglomerate. Jardine Matheson is currently valued at 12 times its trailing earnings and offers a dividend yield of 2.8% thanks to its annual dividend of US$1.45 per share in 2014.

Interested in talking more about the Hong Kong-based "hong"? If you do, you can come meet David Kuo and the rest of the Fool Singapore team on August 15! 

Please join us at Invest FAIR Singapore on 15 August. (Suntec Centre, Booth B-16). Come chat with us at our booth, and see our MAS-licensed Director, David Kuo, give his official SGX investor presentation.

You won't want to miss this! Add Invest FAIR Singapore to your calendar today.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns Dairy Farm International Ltd and Jardine Cycle & Carriage Ltd.