JCYCF - Jardine Matheson: Possibly Too Extreme A Case Of 'China Discount'
2024-05-10 19:11:28 ET
Summary
- Jardine Matheson Holdings Limited has fallen massively in price in the last couple of years, even though the listed controlled subsidiary responsible for 50% of Jardine Matheson Holdings has risen in price.
- The listed subsidiary, Cycle & Carriage, is not focused on Hong Kong or China, which means, given that Jardine Matheson Holdings income has risen, that its price can be blamed on China.
- China's reopening has means pretty strong winds in the sails of several of the segments, leading to decent growth in profits. Meanwhile, prices fall and P/Es fall.
- The valuation and income case is great at face value, but the geopolitical and economic nationalism concerns could continue to plague the stock, whether real or perceived.
- Nonetheless, we think that with how extreme the discount is for its ex-C&C assets is, if there is any asset to play better China sentiment with from allocators, it's Jardine Matheson Holdings Limited.
Jardine Matheson Holdings Limited ( JMHLY , JARLF ) (we'll call it JM or just Jardine for short), together with its listed subsidiary Jardine Cycle & Carriage Limited ( JCYCF ) (C&C for short), represent major businesses in Hong Kong and China's mainland. Together, they have characteristics that would typically invite a high multiple: clear tangible value, profit growth thanks to the end of COVID-zero, relative resilience and track record. Indeed, Jardine Matheson, a storied conglomerate with a long history in Hong Kong, just a few years ago used to command quite a premium valuation.
Now, however, JM's comprehensive P/B has plummeted, and the valuation of assets outside its well-performing Indonesian and SE Asian businesses in C&C has plummeted even further than that. We think there is an angle where allocators become comfortable again with Chinese allocations, with JM being a very operationally solid pick with massive amounts of value to gain on it returning to its more premium status....
Jardine Matheson: Possibly Too Extreme A Case Of 'China Discount'