Home Capital Right Timing

Jardine stable starts attracting investor interest

The Edge Singapore
The Edge Singapore 9/9/2021 06:14 PM GMT+08  • 3 min read
Jardine stable starts attracting investor interest
Jardine Cycle & Carriage is one of the Jardine stable of companies attracting investors interest, followed by Dairy Farm Intl
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

Jardine Cycle & Carriage, which is 75% owned by Jardine Matheson Holdings, is getting less and less coverage from analysts. Most recently, JP Morgan has dropped analyst coverage of Jardine C&C. Yet, the stock remains one of four Jardine-owned companies in the Straits Times Index. And, following the announcement of Hongkong Land’s share buyback, Jardine C&C’s share price is up around 5%.

Hence, market watchers are wondering if Jardine C&C is the next company in the Jardine stable to experience corporate action. For instance, a voluntary general offer for Cycle & Carriage Bintang closed on June 4, 2021, with Jardine C&C lifting its stake in the Malaysian entity to 88% from 59.1%.

Technically, too, Jardine C&C looks ready for a rebound. During the May-September 2021 downtrend, smoothed RSI flat-lined, causing a significant amount of positive divergences between price and indicator. During this phase, volume continuously receded. Low volume, and small price movements on the downside are usually signs of a bottom.

Positive divergences are not sufficient for a stock to rise. For an upmove, any movement needs to be accompanied by an expansion in volume, and a break above a supply or resistance level. Immediate resistance for Jardine C&C is at $20.35, just about at its current level. The next resistance is at $21.60, a level which represents the breakdown from a minor top formation back in July this year. The stock’s net asset value is US$17.5, or $23.62 based on an exchange rate of $1.65 to the dollar.

Jardine C&C’s underlying profit attributable to shareholders more than doubled from US$138 million to US$346 million in 1HFY2021, for the six months to June 30 this year. However, after accounting for unrealised losses arising from the revaluation of its equity investments and a gain on disposal of Astra’s investment in Permata Bank in 2020, net profit was 25% lower at US$226 million. Cash flow generation continues to be strong. Free cash flow stayed above US$1 billion for the second consecutive year.

Dairy Farm International Holdings, which is more than 77% held by Jardine Matheson, also had good cash flow generation in 1HFY2021 for the six months to June 30, with free cash flow of around US$359 million, despite an 85% y-o-y decline in net profit to just US$17 million.

Dairy Farm blamed the poor earnings on continued movement control in the geographies where it operates. Whatever the case, its brands are household names in the various countries they are in — Cold Storage and Guardian Pharmacy in Singapore and Malaysia; Wellcome, Oliver’s, Mannings and Maxim’s in Hong Kong; Hero in Indonesia, and so on.

Dairy Farm’s share price is up some 6% from a one-year low of US$3.39 on Aug 19. Prices broke down from a top formation in early July, with the neckline at US$4.19. Hence, although prices are up 6% from the low, they could rise further, towards the breakdown level translating into a 16% upside from current levels.

Elsewhere, Mandarin Oriental International’s share price has been creeping up steadily, and a break above US$2.08 indicates an upside of US$2.25. At this level, the stock would still be trading at a discount to its NAV of US$2.63, and its adjusted NAV of US$3.95. The adjusted NAV takes into account the fair value of its development property, and market value of its investment properties.

Photo: Jardine House in Hong Kong / Bloomberg

Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.