Right now, Jardine Cycle & Carriage Ltd‘s (SGX: C07) share price of S$30.86 is just 2.2% higher than a 52-week low of S$31.20. This raises an important question: Are Jardine C&C’s shares considered cheap right now? This question has significance because if the company’s shares are cheap, then it might be a good investment opportunity.
Unfortunately, there is no easy answer. However, we can still get some insight by comparing Jardine C&C’s current valuations with the market’s. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
Jardine C&C’s business
As a quick introduction, Jardine C&C is a conglomerate with a diverse set of businesses in areas such as automotive distribution, financial services, heavy equipment and mining, agribusiness, information technology and more. These businesses are housed under Jardine C&C’s subsidiary, Astra, which is based and listed in Indonesia.
In the first half of 2018, Astra accounted for 85.6% of Jardine C&C’s underlying profit of US$413.9 million. It should not be surprising to know that Astra’s businesses are predominantly in Indonesia – which also means that Jardine C&C has huge exposure to Indonesia’s economy.
The other businesses within Jardine C&C are its directly-owned vehicle distributors in a number of Asian countries (including Singapore), and its strategic investments in the following companies: the Thailand-based cement producer Siam City Cement; the Vietnam-based industrial conglomerate Refrigeration Electrical Engineering Corporation; and milk producer Vinamilk, which is also based in Vietnam.
Jardine C&C’s valuation
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for Singapore’s stock market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of the local stock market benchmark, the Straits Times Index (SGX: ^STI).
Jardine C&C currently has a PB ratio of 1.49, which is higher than the SPDR STI ETF’s PB ratio of 1.14. In addition, the conglomerate’s PE ratio is higher than that of the SPDR STI ETF’s (15.3 vs 11.20). The saving grace here is that Jardine C&C has a dividend yield of 3.7% which is higher than the ETF’s yield of 3.5%; the higher a stock’s yield is, the lower is its valuation.
So, I think it’s fair to say that Jardine C&C is priced at a premium to the market, due to its higher PB ratio and PE ratio.
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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.