Why Jardine Group's pool of assets could be 7-8% undervalued

It is structurally attractive, analysts said.

According to Macquarie Research, Jardine Matheson (JM) and Jardine Strategic (JS) derive their NAV from a similar pool of assets. This pool is structurally attractive as it consists of majority stakes in leading Asian retail, property and auto franchises.

Their consistently high EVA generation has enabled JM and JS to outperform the FSSTI by 13-15% annually from 2007-12.

Here's more from Macquarie Research:

We think our estimates conservatively reflect:

Hongkong Land’s strong momentum amid positive rental reversions in the HK office market. That, coupled with a cheap valuation make HKL Callum Bramah’s top pick in the HK Landlords and REIT space.

Dairy Farm’s (DFI) soft patch, from which we expect it to emerge in 2014 with a return to recurring 12-13% earnings growth at >40% ROE. Short-term issues in Malaysia are being fixed and, medium term, DFI’s Health & Beauty roll-out can help offset rising labour costs in DFI’s food segment. Sam Chan initiates coverage on DFI in a separate note today with a Neutral rating and US$12.00 price target (9% total return).

A relatively weaker outlook for Astra International, and therefore Jardine Cycle & Carriage (JCNC). Astra accounts for 96% of JCNC’s NAV. Lyall Taylor rates Astra Neutral due to higher auto competition and weak commodity prices. Still, on his numbers, ASII should remain a >20% ROE / high single digit grower from 2014. We initiate coverage on JCNC in a separate note today with a Neutral rating and S$41.20 target price (6% total return).

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