Jardine Cycle & Carriage Ltd’s Share Price Came Down By 10% Recently: Here’s Why

Jardine Cycle & Carriage Ltd (SGX: C07) or Jardine C&C is a conglomerate with a diverse set of businesses that include automotive, financial services, heavy equipment and mining, agribusiness, information technology, and infrastructure, logistics and others.

In the last three months, the company’s stock price tumbled 10%. In this article, we will try to understand what might have caused the decline.

Reason for the decline

There are many reasons that cause stock prices to move. Generally, stock price movement is driven either by business performance or investor’s sentiment.

The former is related to how a business performs in a given period, looking at metrics like growth, margins, production and others. Here, the ultimate driver is profit.

The latter is driven more by investors’ overall mood, which is described as emotional pairs such as greed and fear, optimism and pessimism, bull and bear, etc.

In this case of Jardine C&C, I believe it is the latter that might have caused the decline in the share price.

Here’s some information to justify my point:

Source: Jardine C&C FY17 First Half Result

From the above, we can see that the company reported stronger revenue and underlying earnings per share (EPS) for the first half of 2017 as compared to last year.

Both revenue and underlying EPS were up by 11% and 13%, respectively, as compared to the same period last year. Such results, though not remarkable, was still positive for the company.

Yet, share price reacted negatively in the last three months despite the company reporting positive first half result.

Clearly, the market has turned negative or less positive about the company. But why so?

Unfortunately, we do not have a clear answer for the question. One speculation is that investors are getting less bullish on the company, especially after the company’s share price has appreciated more than 45% since October 2015.

This might be supported by the outlook statement issued by the company:

“The outlook for the rest of the year is positive with Astra, although its results may be tempered by increasing competition in the car market and soft demand in the motorcycle market. The Group’s Direct Motor Interests and Other Interests will continue to face challenges.”

Here, the positive expectation for Astra is neutralised by the negative issues facing the Direct Motor business.

A Foolish conclusion

In all, I think that the weaker share price was mainly due to the change in investors’ mood from positive to less positive. This is understandable, given that the share price has appreciated significantly since the end of 2015 to early 2017.

Going forward, it will be useful to monitor the group’s financial performance as this will determine its long-term share price performance.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.