What Investors Should Know: 3 Things I Learnt About Jardine Cycle & Carriage Ltd From A Trip To Indonesia

Jakarta Skyline

I recently flew to Jakarta, Indonesia. When I was there, I decided to pay a visit to the headquarters of Astra International Tbk PT.

Astra International is one of the largest conglomerates in Indonesia. While it is a listed company on Indonesia’s stock market, it is also a key subsidiary of the Singapore-listed Jardine Cycle & Carriage Ltd (SGX: C07) – just over 50% of Astra International’s shares are owned by Jardine Cycle & Carriage.

Most of Jardine Cycle & Carriage’s profit comes from Astra International. To the point, Astra International contributed 75% and 91% of Jardine Cycle & Carriage’s total underlying profit for 2015 and 2014, respectively. So, in order for investors to understand Jardine Cycle & Carriage, getting to know Astra International’s business is key.

Here are three things I learnt from the Indonesian company’s investor relations department:

1. Diversification from the automotive industry

Astra International started out in the automotive industry. Today, it is the largest automotive company in Indonesia and distributes best-selling two-wheeler and four-wheeler brands in the country.

But, the company also has plans to diversify from the automotive industry. In recent years, Astra International has increased its investments in other segments such as heavy equipment and mining, infrastructure, and financial services. It is also venturing into the insurance and property development markets.

2. The company’s geographical focus

Astra International can be seen as a conglomerate nestled within a conglomerate (that would be Jardine Cycle & Carriage) that is housed within yet another conglomerate, Jardine Strategic Holdings Limited (SGX: J37).

Such an ownership chain may be confusing for investors, especially when it comes to how the companies within the Jardine group thinks about potential competition or conflicts of interest between them.

But, Astra International has a clear focus: It wants to be a conglomerate in Indonesia. The company has no plans to expand overseas and wants to focus on riding the rise of consumerism in the country.

This can be seen in how Jardine Strategic Holdings had invested a 20% stake in Zhongsheng Group, a Chinese premium car distributor, instead of Astra International.

Moreover, Astra International has an internal philosophy of wanting to be the “Pride of Indonesia.” The company sees itself as an important component of Indonesia’s nation building  efforts and wants to be a socially responsible company instead of being just a profit-driven enterprise.

3. Independence from the Jardine group

According to my interview with the company, Astra International is given strong autonomy by the Jardine group.

This is a good thing for Astra International since it affords them the flexibility and responsiveness needed to address the Indonesian market directly instead of waiting for instructions from management teams outside the country that may not be familiar with the local market.

A Foolish conclusion

All told, I left my meeting with Astra International feeling optimistic about the company. It has a long history of success in Indonesia and seems to have the right culture to create a long-lasting business.

Although some of its business segments have suffered over the past few years – such as the heavy equipment and mining segment – Astra International may just have what it takes to return to its growth-path again in the future.

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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 writer Stanley Lim owns shares in Jardine Cycle & Carriage.