Last month, Temasek disclosed it’s portfolio value had declined by $24 billion to $242 billion. However, I find its negative 9.2% shareholder return unbelievable.
Firstly, the value of Temasek’s mostly-profitable listed major investments have declined by about $20 billion. No one knows if its unlisted investments are making losses but even if they are as profitable, their value should have declined by a similar percentage. This would mean its total loss is closer to $40 billion. Even after taking into account group profits, its portfolio value should have declined by about $30 billion and not only $24 billion.
“Financial Services” alone had declined by a whopping S$14 billion.
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A portfolio decline of $24 billion means the value of Temasek’s unlisted assets has hardly fallen. Although I have no inside information whether Temasek is able to create value out of thin air, this appears to be so. Temasek should clarify.
An example of creating value out of thin air is Pavilion Energy, an LNG investment firm set up in 2013 after oil prices had plateaued.
In FY 2015, Pavilion’s shareholders’ equity was $1.526 billion. Less than 2 years after it was established, Pavilion had lost almost $500 million. After incurring a massive $409 million loss in FY 2016, how could shareholders’ equity fell by a mere $18 million?
If Pavilion were a listed company with a market cap of $1.5 billion and had incurred a massive $400 million loss, it would have likely gone ‘pock kai’. Temasek should clarify.
In March 2014, just before oil prices began to collapse, Pavilion paid Ophir Energy US$1.3 billion in cash for a 20% stake in 3 Tanzanian blocks . According to Pavilion’s CEO Seah Moon Ming, its plan was to “secure long-term energy supply at competitive prices to meet the need for clean energy in Asia”. Based on then-prevailing oil prices of about US$100, Pavilion had overpaid for these “assets”. Temasek should clarify if Pavilion’s massive loss was due solely to this colossal mistake.
Since Pavilion is funded by taxpayers, shouldn’t a complete set of accounts be published?
All public listed companies in the O and G industry have also seen their share prices collapsed. Pavilion’s net worth couldn’t be only $18 million less after making a $409 loss. Even Keppel Corp’s market capitalisation has fallen by more than 35% despite being a profitable company.
Temasek has also suddenly disclosed 2 previously undisclosed major investments, ie “Ascendas Singbridge” and “Surbana Jurong”, both self-valued at $1.3 billion and $328 million respectively. Creating value out of thin air again? Temasek should clarify.
There are many unanswered questions and I believe Temasek’s investments warrant closer scrutiny by Parliament. All said, I find Temasek’s negative 9.2% return in FY 2016 impossible to believe.