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A China Value Play: Jardine Matheson

June 23, 2007 | About:
Holmes R Osborne

Holmes R Osborne

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Jardine Matheson (JMHLY.PK) is a holding company with extensive ties to the Asian markets. It trades at $24.45 and is denominated in dollars. Started in the 1830s by two fellows trading opium to China for tea to Britain, Jardine is probably the best way to invest in a blue chip company doing business in the Orient. Jardine and its subsidiaries are involved in the following: the five-star hotel Mandarin Oriental, auto dealerships in China, office buildings in Hong Kong, supermarkets in Malaysia, auto manufacturing partnerships with the likes of Honda and Toyota, restaurants, finance, and construction.

Jardine is controlled by the Keswick family, heirs of the founders of Jardine. Ian Flemming, author of the James Bond series, was also an heir to a subsidiary which was later sold to JP Morgan. The difficult part to understanding Jardine is that it is a series of complicated cross holdings. The Keswick family owns 10% of Jardine Strategic which owns 53% of Jardine Matheson which owns 80% of Jardine Strategic. Together, Jardine Matheson and Strategic own all or part of several publicly and privately held companies. These include: Hongkong Land, Jardine Motors, Dairy Farm, which owns a chain of supermarkets, the Mandarin Hotel, and Jardine Cycle and Carriage, which owns auto dealerships and assembly plants.

Jardine trades at a price to earnings ratio of about 16 and is at a slight discount to the net asset value of what it’s portfolio of companies are worth. It also has a dividend yield of about 2%. This is fairly priced compared to the overheated Chinese market which trades at a price to earnings ratio in the fifties. Do you remember PEs like that in 2002 in America?

Guru David Winters of the Wintergreen Fund lists this as his largest holding at 5.97%. It looks as though the fund has a cost basis of $18.26 in the stock. This equates to a 34% rise in one year. Other Gurus who own this stock are Marty Whitman, of Third Avenue, who was buying at the end of 2005 and beginning of 2006.

Jardine is a good way to participate in the demographics boom of China and Asia. As the U.S., European, and Japanese work force ages, the Chinese work force is going to be in its peak producing years. The peak producing age range is from about the early thirties to mid fifties. In America, seventy two million Baby Boomers (born between 1946 and 1964) are retiring or are going to retire in the next few years, thus, contributing to a slowing of our productivity. Jardine offers a way to invest in China by a company that has been doing business there for about one hundred seventy years, run by British management.

About the author:

Holmes R Osborne
GuruFocus - Stock Picks and Market Insight of Gurus

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hpmst3
Hpmst3 - 6 years ago
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