Jardine Matheson — avoid
After covering the top company by market cap in Singapore (DBS) and its local peers, I thought I’d turn my attention to the next big company: Jardine Matheson. Here are the reasons why I don’t think this is a good stock to own.
- Lack of synergy
This is how a simplified version of the conglomerate looks like
Below are where it derive its FY2019 profits from
The disparate business segments do not hold much synergies. The company loosely markets itself as banking on growing the consumer story in Asia. There are also significant overlaps between the different associate entities, such as Astra and Jardine Pacific, Jardine Motors and Jardine Cycle & Carriage.
Basically, the business model as a whole does not make sense. I doubt the conglomerate’s value is greater than the sum of its parts, which is really is the only yardstick to judge a conglomerate.
2. Hong Kong
58% of the group’s income is derived from Hong Kong, which is experiencing turbulent times recently with the National Security law, protests and pressures from China. This has impacted the group’s FY2019 financial results and further uncertainty will be detrimental to the business.
3. Governance issues
I reproduce a quote from an article from the Financial Times below that summarises succinctly my disquiet with this company:
“But today’s Jardines is primarily Sir Henry’s creation. It is an intensely conservative institution that does not give a fig for modernity or the views of outside shareholders, and is overseen by an all-male, family infused board of directors. It is equally a daring merchant adventurer with plenty of grit.” (Link: https://www.ft.com/content/c92d52ce-0525-11e9-9d01-cd4d49afbbe3)
This is a company driven very much by one man and a close knit of family. All well and good when the main man is alive and kicking at the top. Once he is gone, the flaws of such a system will come home to roost.
