Jardine Matheson Holdings Limited (SGX: J36) is a conglomerate, which is dual-listed in Singapore and London. It is a diversified Asian-based group which was founded in China in 1832.
The company’s business span multiple industries that include property, retail, and luxury hotels to motor vehicles, engineering and construction to transport.
Between 1 January and 31 December, Jardine Matheson’s total return, which includes reinvested dividends, has outperformed the Straits Times Index (SGX: ^STI). The former returned 17.5%, whilst the latter dropped 6.5%.
With the strong performance registered by Jardine Matheson, is it still a bargain at current prices?
To find out we will be using four metrics, namely, the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and the net-debt-to-equity ratio.
Jardine Matheson’s four-year (2014 to 2017) EPS, has been between US$4.62 to US$10.06. This indicates that the current TTM EPS is in the middle of the range.
At the end of the second quarter of 2018, Jardine Matheson reported a Net Asset Value per share of US$68.48, which equartes to a P/B of 0.98. A P/B ratio of less than one indicates that investors are getting the company’s assets at a discount.
From 2014 to 2017, Jardine Matheson saw its NAV per share increase from US$51.6 to US$68.21, indicating a compound annual growth rate of 9.75%.
Jardine Matheson had a net debt position of US$8.27 billion, while equity stood at US$25.83 billion. This results in a net-debt-to-equity ratio of 32%.
Over the past four years (2014-2017) Jardine Matheson’s net-debt-to-equity ratio has been between 9.6% to 14.9%. This means the diversified conglomerate’s balance sheets has weakened slightly over the past year.
Lastly, the Jardine Matheson’s dividend has improved over the last four years rising from US$1.45 in 2014 to US$1.60 in 2017. Assuming the company pays out a dividend at the same rate as 2017 this would lead to a yield of 2.4% at current prices.
So, on the one hand, Jardine Matheson’s strong growth in NAV and growing dividend payouts suggests a fair valuation. However, its mid-range P/E and high-net-debt-to-equity ratio point would imply the opposite. Nevertheless, it’s worth a closer look.
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The Motley Fool Singapore writer, Esjay, contributed towards this article. Esjay does not own shares in Jardine Matheson.
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 own shares in Jardine Matheson.