Jardine C&C - Possible Opportunity for Dividends

Just saw the price of Jardine Cycle and Carriage continuing its fall today, dropping to as low as $33.03, as well as the STI,(read: Does the recent drop in the STI represent a good buying opportunity?) which . Despite the rights issue that it just had (1 right at $26 for 9 shares), it may be a good buy now as the price has fallen quite a far bit in recent weeks.

(Image source: http://sgforums.com/forums/4148/topics/448537)

Jardine Cycle and Carriage currently has a P/E ratio of 11.31, which is going to increase after the rights have been issued and exercised. However, it also pays out good dividends, which can make it a good dividend stock to hold. It paid out 135 cents in dividends for 2014 and 152.2 in 2013, which is a dividend yield of 3.67% and 4.14% (adjusted for the split) at a price of $33.10. 

Though well-known for selling Mercedes-Benz cars in Singapore, most of its profit is actually derived from its 50.1% subsidiary company, Astra, which is listed in Jakarta and whose outlook is affected by the low commodity prices and slowing Indonesian economy. This also explains (if you read the income statement of the financial statements, more explanation on how to do so: Understanding Financial Statements (Part 1): Income Statement) the large amount of profit attributable to non-controlling interests. 

Its profits in recent years has been declining, but this seems possible due to the cyclical nature of commodity prices as well as its automotive business and does not seem to have a long-lasting impact that would affect the future profits of the company. So, it is definitely worth considering at the current price. Though the rights issue would have a dilutive effect, the dividend yield as highlighted above is not bad after taking into account the rights issue. The rights issue also helps the company to raise extra cash to pay off its loans that it took up while buying a stake in Thailand's second largest cement maker.

For the long term investor, purchasing Cycle and Carriage may be good to consider as it has offered good dividends in the past. However, you should take note of some of the pitfalls and the risks that may affect the company during the medium-short term and long-term as well. Risks such as a prolonged slowdown of the Indonesian economy as well as the strengthening Singapore Dollar compared to the Indonesian Rupiah are some of the things that investors will have to grapple with before coming up with a conclusion on Jardine Cycle & Carriage.

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