Jardine Matheson

Hi Elliot,

Yes, you are right, foreign exchange is a real risk as the company reports and gives dividend in USD while rupiah tends to weaken. The company got about 56% of its underlying profit from Southeast Asia in 2023, predominantly in Indonesia because of Jardine Cycle & Carriage and Astra motor vehicle businesses.

Also, concentration risk is also one that affects the company in terms of the macroeconomic and political environment in Indonesia and China (including HK like what you pointed out) as the company gets a big chunk of its revenue and underlying profit from these 2 countries.

The company is also in some semi-cyclical industries like the motor vehicles. Consumers tend to spend more on big-ticket items like cars when they have more money and vice versa. But, I also noticed that the diverse industries that Jardine Matheson is in seem to even out a bit the semi-cyclicality of its businesses, i.e. when 1 segment is down, another 1 is up to support.

You will also have to pay attention to commodity prices as the business sales could be down when the prices of coal and gold are down (its mining and heavy equipment business).

This conglomerate business really depends on the management to execute. I will look at its dividend per share and payout ratio (average between 40% and 50% in the past) as the business has been around for almost 200 years and the management shows its track record in its increasing DPS almost year after year (some years were flat) in the past 20 years. If net profit is down in the future, the management actually has a lot of room to increase its dividend payout to maintain the same dividend per share. The management is also buying back its company shares recently when the share price was down, they seem to know what they are doing.