Friday, July 6, 2012

Temasek In The Rough

Temasek's portfolio value hits a record $198 billion, screamed the headlines, while smaller fonts disclosed that the rate of return on shareholder funds was a miserable 1.5 percent. Hey, anybody can be a big spender, it's what you get in return that matters - and justify a high paying job. And 1.5 percent is easily attainable at most banks for long term fixed deposits in the right currency mix.

Apparently Temasek has an internal benchmark of 8 percent rate of return, and Wealth Added bonuses are distributed to its staff when this is exceeded - GDP bonuses, national bonuses, wealth added bonuses, the powers that be can be real creative when it comes to rewarding themselves. Meanwhile, the citizens who contribute to the source of funds for their monopoly games are limited at 2.5 percent return. The previous year's report card was 4.6 percent, which makes the number for fiscal year ending March 31 look real bad. The return over 38 years since its inception in 1974 has always been showed off as an annualised 17 percent.

Temasek profit fell 16 precent from $12.7 billion to $10.7 billion. That didn't stop Temasek from splurging another $5 billion in it's shopping spree.  Like $2 billion in US based shale gas producer FTS International and $1.3 billion in fertiliser producer Mosaic Company. These investments helped boost its exposure to North America and Europe from 8 to 11 percent, two geographies which are not exactly in the pink of economic health.

We are also told Temasek made $22 billion worth of investment in total, against $15 billion of divestments. What we are not told is whether Chesapeake, whose stock tumbled more than 30% in the last financial year, is featured in either exercise.

In May 2010, Temasek Holdings and Beijing-based Hopu Investment Management Company agreed to buy a combined US$600 million in convertible preferred stock of New York-listed Chesapeake Energy, and an additional 30-day option to acquire a further US$500m of the stock. The convertible preferred stock carries a coupon of 5.75 per cent and the proposed US$1.1 billion investment will translate to about 7 per cent stake in Chesapeake.

In April 2012, the NY Times reported that controversial borrowing practices by Chesapeake Energy’s CEO Aubrey McClendon raised additional scrutiny by the Securities and Exchange Commission (SEC), as well as sinking the company’s debt rating. Temasek Holdings’ investee company, Chesapeake Energy Corporation, had its debt rating cut to ‘BB’ which is a “Junk” or Non-Investment Grade by Standard & Poor’s.

As recent as 3 July 2012, Reuters reported that the U.S. Justice Department is probing Chesapeake Energy Corp and Encana Corp for possible collusion after email leaks showed that top executives of the two rivals plotted in 2010 to avoid bidding against each other in Michigan land deals. In one email, Chesapeake Chief Executive Officer Aubrey McClendon told one of his deputies on June 16, 2010, that it was time "to smoke a peace pipe" with Encana "if we are bidding each other up."

In the light of all these disclosures, any other CEO would start to polish up his or her resume. But we are talking about Temasek Holdings.

16 comments:

  1. Only in Singapore can one get away with such behaviour. & performance year after year.....

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    1. That's probably the reason why it was clarified her appointment had nothing to do with her PM husband。

      And does she need a resume?Her face alone will probably scared the shit out of any appointment Board!

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    2. Christmas come early and TH is the Santa Claus.

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  2. Today's post and this, http://www.baldingsworld.com, will make you want to cry - if you are a Singaporean. Seriously.

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  3. //April04 2012
    Parliament has authorised the Ministry of Finance to borrow a further S$170 billion, through the issuance of government securities.
    The increase raises the ceiling for issuing government securities to S$490 billion.
    Minister of State for Finance Josephine Teo said 80 per cent of the increase will be issued to the Central Provident Fund to meet its investment needs.//

    More CPF money went into the black hole, where even the light of transparency cannot be seen.

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    1. This sounds like buying on margin. What are they going to do when there is a margin call? Issue more debt?

      In a (worldwide) deflationary environment, borrowing on margin is just asking for trouble.

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  4. We have often been warned if we are not careful, we end up with an incompetent dose of government. Maybe like the one up north always perceived to be a good example.

    Yet such an incompetent govt has paid a yearly return ranging from 5%~8% over all these years to EPF members for their savings, with no qualifier such as our 4% interest rate subject to the 1st S$60K.

    If Temasek investments can attract an annualised 17% return and yet only paid a miserable 2.5%~4% to our CPF members, are they not blood suckers ? How can our CPF Board allow our CPF members to be cheated like that ?

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  5. /// How can our CPF Board allow our CPF members to be cheated like that ? ///

    The people giving out the miserable 2.5% ROI are the same people who control the CPF board aka the Leegime, makes sense?

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  6. Asked our law makers what are they doing.

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    1. More productive to ask our 60% voters what are they doing?

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  7. vote the pap out, wholesale

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  8. We need a STRONG and an independent media to touch on every single aspects of Temasek with regard to its operations.

    Backed by robust debates and participations by all Singapore citizens, who must speak up to raise issues and opinions, on Temasek Hlgs where we all have a stake.

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    1. We already have this on the internet.

      If you are talking about newspapers.
      Then ask your Millionaire-In-White who claims to represent you in parliament.

      Don't believe we have issued any new license to published newspapers in Singapore other than to SPH.

      Elephant in the room question:
      Why must a license be required in the first place?

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    2. That is why we need and can only break up the State- controlled media through the ballot box .

      By a Strong and Independent media means political change must come first.

      So far internet chat has not asked why, Temasek with $190B assets, govt still need to spend $1.1 BILLION of TAX-PAYER money into a Temesek company.

      Arent SMRT/Delgro/sbs Temasek babies?

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  9. I always wonder why none among the intelligent (aka sycophants) financial press reporters/writers has ever asked this question: temasek has total assets of $300b, but a portfolio of only $200b. So what is classified under those $100b of "non portfolio assets"? perhaps at its covenience, like all Wall Street banks, it chooens to re-clasify some under-performing portfolio assets as "non-portfolio assets", hence ensuring survival bias when it computes its returns? Just a conspiracy minded old fool's question. But one who has over many decades seen this being done under the noses of complicit auditors and risk managers with my own eyes.

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  10. Ok, pse excuse my dumb question: if their "annualised" return over 38 years was 17%, that means they made 289 times (1.17 compounded over 38 years gives 289) over their original investment. This 289x is conservatively computed assuming no additional injection of funds from MoF over those 38yrs, otherwise, the multiple would be much higher than 208times. With a current portfolio of $200b, it means they started off with less than $500m capital. Singtel alone was worth alot more than $500m when it was injected into Temasek.


    And another interesting fact: a 17% pa.a return over 38 years would make temasek the world champion, better than Yale's Dave Swensen's 14% over the last 20yrs, better than Warren Buffett's 6x money over his lifetime! So maybe they really deserve their billion dollar salaries then?? Why would Ho Ching still stick around and not be hijacked by Buffett to be his anointed heir? Come on you sycophants, the FTs, WSJ, Economists Bloombers out there, please do your stupid job and challenge the lies.. you arse lickers MSM

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