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Is Jardine Cycle & Carriage Ltd A Bargain Now?

Jardine Cycle & Carriage Ltd (SGX: C07), which is part of the Jardine Group of companies, has a diverse business portfolio. They include a strategic interest in Indonesia’s Astra International (IDX: ASII), a strong automotive presence through its Direct Motor Interests and other interests in the refrigeration, cement and milk business.

In Singapore, Jardine C&C is best known as the retailer of Mercedes Benz, Mitsubishi, Kia, Citroen, DS, and Maxus motor vehicles. The company has a market capitalisation of S$14.55 billion currently.

Between 1 Jan to 31 Dec 2018, Jardine C&C’s total return, which includes reinvested dividends, has trailed the Straits Times Index (SGX: ^STI). The former retreated 10%, while the latter dropped of 6.5%.

With the 10% share-price decline recorded by Jardine C&C in 2018, is the company a bargain at current prices?

The price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and net debt to equity ratio might provide some useful pointers.

The conglomerate has recorded a trailing twelve months (TTM) earnings per share of US$1.47, which converts to S$1.99 (US$1 = S$1.35). With its current share price at S$36.81, this implies a P/E ratio of 18.5.

The one-year historical P/E for Jardine C&C, however, stands at 13.3. In other words, it means that Jardine C&C is more expensive now compared to the previous year. But Jardine C&C did record a write-down on its non-trading items in the second quarter of 2018 that led to a sharp drop in profits during the quarter. Hence, the drop in TTM earnings.

At the end of the third quarter of 2018, Jardine C&C reported Net Asset Value per share of US$15.07 (S$20.39), which results in a P/B ratio of 1.81 at current prices.

As the automotive distributor is more of a services company, it is not unusual for the P/B to be greater than one. For services companies, it could be better to compare the prevailing P/B with its historical average or an industry average for some context.

At end September 2018, Jardine C&C had a net debt position of US$4.36 billion, while total equity stood at US$12.88 billion. This results in a net debt to equity ratio of 34%.

Over the last three years (2015-2017), Jardine C&C’s net debt to equity ratio has been between 24% to 31%. This means the automotive distributor’s balance sheets has weakened slightly over the past year.

Lastly, Jardine C&C’s dividend has risen over the last three years, moving from S$0.95 in 2015 to S$1.18 in 2017. Assuming the company pays out a dividend at the same rate as 2017, then this would imply a yield of 3.2% at current prices.

Looking at the four metrics, Jardine C&C’s poor performance might be due to its one-off losses and a weakening balance sheet. The rising dividend over the past three years, however, might suggest a more confident outlook by mangement.

It seems s though more investigation will be needed to determine if Jardine C&C is a bargain at current prices.

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The Motley Fool Singapore writer Esjay contributed towards this article. Esjay does not own shares in Genting.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo owns shares in Jardine C&C.