When it comes to the performance of Temasek Holdings, Singaporeans read only all the good stuff in the PAP-controlled media and have mistakenly believe Temasek is a savvy investor. There is ample evidence to confirm it has been an utter failure: it has been replacing our profitable local companies with foreign ones and making ‘astonishing’ returns which are actually below its opportunity cost.
An objective way to look at this issue is by asking a simple question – would Temasek’s net portfolio value be higher if national assets transferred to Temasek, f.o.c. or at lelong prices, have not been replaced with riskier foreign ones?
We don’t need to scrutinise the entire list of companies but the 10 largest ones, ie Singtel, DBS, Keppel Corp, Capitaland, SIA, PSA, Singapore Power, Sembcorp Ind, S T Engineering and SATS, to get an idea of Temasek’s real performance.
Since Temasek claims its net portfolio value was S$266 billion as at 31 March 2015, we’ll use the+ market capitalisation/shareholder equity on the same date (table below).
|Name||Mkt cap ($bil)||Div ($bil)|
|S T Eng.||3.9||0.5|
If our local companies have not been divested, the ten biggest companies would have contributed to $200 billion in net portfolio value. During the 41 years of Temasek’s existence, these mostly-profitable companies were making hell lot of money or it would not have paid out dividends totaling $7.99 billion in FY 2015.
Using an extremely conservative estimate of an average annual dividend payout of $2 billion or $3 billion, total dividend payout over 41 years would have amounted to $82 billion or $123 billion respectively. If dividends have been reinvested (magic of compound interest), Temasek would be sitting on at least $350 billion in net portfolio value!
To get a better idea of the amount of dividend payout, just look at Singtel’s – in 11 years, Singtel paid out a total of $33.8 billion ($2.12 X 15.94 billion shares).
Singtel dividend history, 2004 to 2015 (link)
Singtel, then Telecoms, was the most profitable statutory board for FY 1988/1989 with a net revenue of $620 million. Read about Singtel at this link to better understand how other profitable national assets were transferred to Temasek, without which there would have been no ‘miraculous’ return.
Singtel’s and other GLCs’ profitability suggests the present aggregate value of Temasek’s original portfolio, if not divested, would have probably been a lot more than $350 billion. The 10 companies in the table above have been profitable for decades.
(Let’s put aside the other companies which were also mostly money spinners. Their profits would have easily offset the losses of NOL, Ho Ching’s perpetual loser – Chartered Semiconductor, Micropolis, etc. If that’s not enough, do remember our 101% profitable Singapore Pools contributed billions to Temasek until 2004. What about pocketing $12 billion from the sale of our 3 power generation companies?)
Was Temasek’s performance as glowing as propaganda would have us believe? The answer is obviously ‘NO’ because Temasek’s net portfolio should be worth at least $350 billion, not $266 billion.
The logical conclusion is Temasek has been taking high risks by divesting national assets and subsequently using their proceeds to invest in riskier foreign companies which did not provide commensurate returns. It then engages in propaganda to claim it has achieved stratospheric returns.
Singaporeans should not fear to question and demand full transparency from the government because Temasek’s reserves belong to every citizen. We should start to think instead of regurgitating propaganda as our opinion.
Common sense tells us Temasek has to achieve returns above the opportunity cost of divesting national assets. Since Temasek has actually achieved returns which are actually much lower, we are actually better off without Temasek.