Temasek Holdings, Who?

Temasek holding delivers record profits S$ 18Billions (US$12.8 Billions @ 1U$=1.4 S$) for 2008. Who the heck this Temasek holding is? And why should you care about them? Alright, they are the largest shareholder of Merrill Lynch. They are powerful enough to negotiate with Merrill to recoup all their Merrill investment losses by halving their purchase price by obtaining additional shares. They have invested to into key blue chips of emerging markets. They are rich and have plenty of cash. They are one of the Singapore’s Sovereign Wealth Fund. Let’s review the highlights of the business results first, straight from their website

  • Group net profit was a record S$18 billion, double the year before.
  • Total shareholder return (TSR) by market value for the year was 7% with lower marked-to-market gains due to market uncertainties at the March year end. (This was lower than their long term record)
  • TSR by shareholder funds was a solid 17%, reflecting strong operating performance of Temasek portfolio companies and realised gains from investment activities.
  • Net portfolio value grew 13% to S$185 billion, or 24% in USD terms to US$134 billion.
  • Temasek’s exposure to Singapore was stable at S$60 billion but this accounted for a smaller share of the portfolio – 33%, compared to 38% last year.
  • Investments post-2002, when the focus on Asia began, are now valued at S$77 billion, delivering a six-year compounded return of 32% per year compared to a six-year compounded return of 16% per year for the rest of the portfolio.
  • Investments in the financial services sector form the largest sector of the portfolio at 40%, with telecommunications and media being the second largest sectoral exposure at 24% of the portfolio (versus 38% and 23% respectively in financial year ended March 2007).
  • During financial year ended March 2008, Temasek made S$32 billion of new investments and monetised S$17 billion of its portfolio, compared with S$16 billion of new investments and S$5 billion of divestments the year before.
  • Volatility has increased substantially. Value-at-Risk has increased to S$40 billion on a portfolio of S$185 billion. This means a 16% probability of a value loss of over S$40 billion on a marked-to-market basis in the 12 months to March 2009.
  • Temasek’s support for the community is almost S$1 billion over the last decade with S$500 million of endowment to Temasek Trust. Among its principal beneficiaries, Temasek Foundation confirmed a commitment of S$16 million to fund 14 projects across Asia in its first year since its formation in May 2007.

What are they saying?

“We are concerned with the emerging risks of stagflation. This presents huge socio-political as well as economic risks in the next 3-5years. Opportunities may be limited in such a scenario”.

When someone like Temasek is saying something, it’s time we pay attention to the direction they are pointing to.
Why should you know about them? I think it’s important to know how “Big Boys” do their portfolio allocation. I shall encourage my readers to download and read the full report. It’s full of valuable insights. Here is the link to download the report. A full 40% is invested into financial services, followed by 24% into telecom and communication. But before you think they are way too overexposed to finacials, you may want to look at the companies that they have invested in. I am sure you may rethink your opinion about them.

Have fun exploring annual report of one of the most respected and vibrant Soverign Wealth Fund (SWF).

Profitable trading, OP





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