Temasek reports 29% drop in profits due to fewer transactions
By Yvonne Cheong, Channel NewsAsia | Posted: 02 August 2007 1758 hrs

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SINGAPORE: Singapore investment firm Temasek Holdings has reported a 29 per cent drop in full-year earnings.

Net profit for the financial year ended in March amounted to S$9.1 billion or US$6 billion.

The value of its portfolio stood at S$164 billion, which was 27% higher than the previous year.

This is the first time that its portfolio has breached the US$100 billion mark.

Temasek also said that it made new investments of nearly S$16 billion in the last financial year.

It also divested assets worth more than S$5 billion.

Although its net profit declined by 29% on year, Temasek said the numbers were still strong.

"We achieved profits of about S$9 billion, lower than the year before. That reflects the number of transactions that we did last year. It reflects our cautious outlook of the market during the year, but we're happy to see that the S$9 billion remains our second highest ever profit number for Temasek," said Ng Yat Chung, Temasek's managing director for portfolio management.

The drop in net profit was partly due to an impairment charge on Temasek's stake in the Thai telecoms group Shin Corp.

"We have made accounting impairment to our investment in Shin. I'd like to point out that we're a long-term investor. We're still optimistic about the medium-term outlook for the Thai economy and we believe the business in Shin, the fundamentals, are sound. So I think we look to the company to grow the business and generate healthy returns for us," said Mr Ng.

Temasek did not reveal the size of the Shin Corp impairment, but overall, Temasek booked a loss of S$830 million from its associated companies, which include Shin Corp.

Temasek said its investment outlook remains one of caution in light of medium-term geo-economic risks and signs of volatile market conditions.

But it said it is concerned about the calls for more protectionism in Europe and the US towards sovereign wealth funds.

Temasek said it hoped to distinguish itself by being transparent.

Mr Ng said: "We believe that the free flow of investments across countries is beneficial to economies and to consumers. We'd be very disappointed, I think, if the current debate on sovereign wealth funds eventually leads to imposition of protectionist measures against free flow of investments."

Temasek has been looking for investment opportunities outside Singapore.

It recently bought a 2.1% stake in Barclays Bank.

It has also bought an additional 1% stake in Standard Chartered Bank, raising its shareholding to 14%.

"We find Stanchart interesting because it has a strong reach in Asia, and that fits in well with our investment themes when we focus on growth opportunities in Asia," said Mr Ng.

In terms of returns, Temasek reported a one-year total shareholder return by market value of 27%. - CNA/ir