Temasek posts 19.2% TSR as net portfolio value rises to S$266b

Singapore

TEMASEK Holdings has reported a total shareholder return (TSR) of 19.2 per cent for the year ended March 31, 2015, as its net portfolio value rose S$43 billion to S$266 billion, thanks to a global equity rally.

The Singapore investment company said on Tuesday that the year under review was its most active since the global financial crisis, and this has resulted in a noticeably smaller Singapore exposure as Temasek scoured the world for investment opportunities.

Group net profit rose to S$14.5 billion, from a restated S$10.9 billion - due to new accounting standards - in 2014.

"Our portfolio," said Temasek chairman Lim Boon Heng, "has benefited from the generally favourable global environment for equities last year."

The Standard & Poor's 500 Index added 10 per cent and the Stoxx Europe 600 Index jumped 19 per cent in the year ended March, according to Bloomberg. The Straits Times Index rose 8.1 per cent in the same period.

Temasek also did well against key benchmarks. It's 19.2 per cent one-year TSR was higher than the 11 per cent for MSCI Singapore and 16 per cent for MSCI World. But it was outperformed by MSCI AC Asia ex-Japan's 21 per cent.

Temasek's three-year TSR came to 9.62 per cent. Longer term 10-year and 20-year TSRs were 9 per cent and 7 per cent respectively. TSR since its inception in 1974 was 16 per cent.

It was a busy year as Temasek sold and bought companies worth S$50 billion.

"This was the most active year for us since the global financial crisis," said Mr Lim. "We made S$30 billion of new investments, and a record S$19 billion of divestments."

At a media briefing, Ravi Lambah, senior managing director, said: "New investments had three themes - consumer, financials and life sciences."

Investments are funded primarily from dividend and distribution income, as well as proceeds from divestments. About half of the new investments are in Asia, followed by the mature markets of North America and Europe. Exposure to North America and Europe rose to 17 per cent from 14 per cent previously.

Overall, Singapore remains the largest country exposure by underlying assets, at 28 per cent of its total portfolio, down from 31 per cent previously. This is an increase of S$24 billion over the last 10 years, it said.

China is the second largest country by exposure at 27 per cent, up from 25 per cent previously. Next is Australia at 9 per cent, mainly represented by its stake in Singtel, which owns Aussie telco Optus.

Temasek's 51 per cent stake in Singtel makes the telco its single largest holding, representing 13 per cent of the portfolio. Singtel is also the largest stock by market capitalisation in Singapore.

Exposure to Asia excluding Singapore rose to 42 per cent, from 41 per cent, as Temasek increased investments in China. The company said: "From our earlier investments in banks as broad proxies of a transforming economy, we have broadened our exposure to include sectors like insurance, consumer, and technology, which are likely to benefit from the transformation of China."

Its 5 per cent stake in China Construction Bank represented the portfolio's third-largest holding at 6 per cent. This is after Temasek pared its stake by about one per cent.

Temasek executives said that the company's investments are driven by commercial principles and it looks for opportunities around the world.

Countries that it is focusing on include China, India and Mexico which have introduced structured reforms, said Mr Lambah.

There is "no pre-set limit on any country or sector", said Wu Yibing, Temasek's head for China. He said that the increased exposure in China came not just from new investments, but also from the increase in asset values.

The torrid performance of China's stock markets of the past month, down some 30 per cent, has not put off Temasek as the country is entering a slower, more sustained stage of growth, he said. We believe the capital market will continue to grow "as the government is determined to make it become one of the most important in the world", said Mr Wu. The short-term volatility could provide more opportunities, he said.

The sell-off that began on June 12 has wiped roughly US$3 trillion off the market, in China's steepest decline since 1992, according to data from Bloomberg.

By sector exposure, financials remains the largest at 28 per cent, but down from 30 per cent in 2014. The biggest jump was in consumer, to 15 per cent from 12 per cent. During the year, Temasek completed a US$5.7 billion investment in AS Watson, a leading international health and beauty retailer, with over 11,600 stores and 13 retail brands in 24 markets worldwide.

Last year, Temasek set up its London office to cover Europe, and the New York office for the Americas.

It also made its first major foray into real estate, investing in London's MidCity Place and 22 Bishopsgate, a combination of office and mixed-use development assets.

Temasek's 18 per cent stake in Standard Chartered PLC is likely to be the only major disappointment in a sparkling year as the bank struggles with falling profits, and boardroom and senior manager exits.

The UK-based bank's market capitalisation fell to £27.07 billion (S$56.71 billion) as at March 31, 2015 from £30.46 billion a year ago. The one-year TSR came to a negative 7.5 per cent. On Tuesday, the market cap fell further to £26.06 billion.

In 2013, StanChart was Temasek's third-largest counter at 7 per cent by portfolio value.

Bill Winters, StanChart's almost one-month-old chief executive, has said that the bank would need to raise capital and he is expected to give more power to some subsidiaries in markets such as Hong Kong, Singapore, India, the United Arab Emirates and Africa.

Mr Winters was also in Singapore last month and met Temasek executives.

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