Like Dairy Farm Group, Jardine Cycle and Carriage (SGX:C07) had been a multi-bagger stock. This meant if you had purchased $1000 of its stock during its IPO, it would be worth approximately $50,000 in 2013. Even at present, the stock is still up by about 20x since its initial offering.
Despite its present technicals breaking the cup-and-handle trading setup, I can’t help but notice that there may be some underlying strength left in this stock, which I deduced from it being oversold. With a 152% change from its underlying profit in the 1H2021 compared to 1H2020, Jardine C&C may surprise us.
So let’s revisit this once mighty multi-bagger company today.
Jardine C&C, a Highly Diversified Business
Despite its name, the automotive sector only accounts for a quarter of Jardine Cycle and Carriage (JC&C)’s underlying profits.
Much of JC&C’s core profits come from other diversified sectors, such as financial services, heavy equipment, and mining.
Additionally, Singapore only accounts for 4% of its underlying profits. Thus, the state of the country during Covid-19 is unlikely to have any significant material impact on JC&C’s stock price.
Here are some of the companies which fall under JC&C’s wing: (taken from 2021 Half Year Results Presentation)
JC&C’s Valuation
Interestingly, JC&C feels like a forgotten toy left at the back of the playroom, because after I did an extensive search, there appear to be no price targets set by analysts for the company.
Target Price & Analyst Coverage
Even its most “recent” coverage from CGS-CIMB was back in 2019, so it seems JC&C is indeed out of everyone’s radar now.
Fundamentals
In terms of valuations with the PE as the most basic benchmark, we have JC&C sitting at the PE of 12.23, which sounds like it is an extremely undervalued company.
However, I would urge value investors to take caution as there is one compelling reason why I think this may be a value trap.
Why Jardine C&C could be a value trap
One possible reason a company remains undervalued for an extended period of time is its lack of a catalyst. Every company needs catalysts for it to grow, which can be in the form of new partnerships or patents, breakthrough products, the discovery of new technologies, etc.
However, I’m unable to see any catalyst on JC&C’s horizon and this may be one of the reasons for its continued bear run since its 2013 highs.
Moreover, the impact of Covid-19 on JC&C is still very uncertain, due to the diversified nature of its business.
The Group continues to operate in challenging conditions and uncertainty remains about the duration of the pandemic. We expect these conditions to continue for some time and it is too early to predict what the impact of the pandemic will be on the Group’s performance in 2021
Chairman’s Outlook – Annual Report 2020.
2 reasons that JC&C is still worth considering
Dividend Payout
While I’m not much of a dividend investor, I noticed a decent dividend payout from the company despite its falling share price. Compared with other blue chips in the industry, JC&C is currently among the top 10, with a dividend yield in 2021 at 3.61%.
Increasing Profits
Furthermore, we are seeing JC&C report an amazing 1H2021, with an underlying profit increasing by almost 150% since 1H2020. If this is the kind of “uncertainty” the chairman is referring to then, by all means, do keep it coming.
Technical analysis of JC&C
All stocks fell in March last year, but JC&C was quick to form its first resistance level at $24. Subsequently, we saw a cup and handle pattern emerge, which typically indicates the continuation of a bullish trend.
Unfortunately, prices failed to rally past the $24 resistance and we’re now seeing a continued bearish trend, which is clearly observant of the channel resistance line.
I infer that there is little strength in the short term, as the RSI shows a clear correlation between the stock’s oversold status and its decreasing share price. The chart patterns are unclear at present.
Hence, for investors looking to take a position in JC&C, I’d recommend waiting for more confirmation before deciding to do so.
Traffic lights showing yellow
While JC&C’s fundamentals are holding up well and it had a positive 1H2021, its technicals don’t seem to be aligned. However, it would appear that its share price would continue to remain muted as long as there are restrictions to movement within its operating economies.
As the charts have not shown a strong move upside yet, it would be best to stay on the sidelines and wait for further confirmation before making an entry.
I am not vested in Jardine Cycle & Carriage at the time of this writing.