Asked on 16 Apr 2019
Discuss anything about share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell this stock on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment!
TL;DR JCC is a strong and mature business well diversified across South East Asia, although bottom line has not moved much recently. JCC bears risk since it is a highly capital intensive business and seems to be exposed to political, economic and regulatory risk across Asia.
JCC the largest independent automotive group in Southeast Asia with strong exposure in the automotive sector across Singapore, Malaysia and Myanmar, Indonesia and Vietnam through its associates. They have 250,000 employees across Asia.
Despite increases in revenue from FY17 to FY18, net operating costs had a more than proportionate increase which led to operating profit being lower. Lowered financing income and increasing financing charges due to higher debt being taken on led to net profit that was almost 25% lower than last year.
With a current ratio of slightly higher than 1, JCC’s short-term liquidity doesn’t look especially strong. A leverage (D/E) of 0.55, CDL seems more leverage as well, with debt forming a larger proportion of capital structure more than equity. With a Debt/EBITDA of 3.1, CDL’s coverage ratio seems slightly higher as well.
Cashflow from operating activities was higher than last year due to significantly higher cash generated from operations. However, cashflow from investing activities continued to be negative due to high purchase of PPE and investment properties. Cash flow from financing activities turned a negative because of lesser drawdown of loans and higher repayment of loans.
With a P/B ratio of 1.55, JCC seems to be trading at a discount relative to their 5-year average P/B ratio of 2.1. However, with a P/E ratio of close to 24, JCC seems to be trading at a premium with a 5-year average P/E ratio of 14.5. This higher P/E ratio could be attributed to the decreased earnings, which led to higher increase in the P/E ratio.
Unique Exposure to SEA
JCC is exposed to various diversified industries and has an automotive presence through its Direct Motor Interests operating in SEA. JCC also offers exposure to Thailand and Vietnam through its other strategic Interests. This greater diversification helps to reduce the risk of fluctuating earnings, and allows JCC’s business as a whole to become more stable.
Although JCC seems well diversified across this region, economic, political and regulatory risk could all affect the risk which this business bears. This is especially true for regions like Myanmar and Thailand, which are undergoing significant political developments currently. Changes in these regions would affect JCC’s operations significantly.