Temasek’s net portfolio value drops from record high after COVID-19 ‘cut short’ promising year
SINGAPORE: Temasek Holdings on Tuesday (Sep 8) announced a fall in its net portfolio value for the last financial year – its first in four years – but said its balance sheet remains “resilient” and that it has the flexibility to rebalance its portfolio accordingly.
For the year ended Mar 31, its net portfolio value dropped to S$306 billion, down 2.2 per cent from the record S$313 billion it achieved a year ago, according to its final annual review.
Its one-year total shareholder return, which takes into account all dividends distributed to shareholders minus any capital injections, turned negative at -2.28 per cent, compared with a 1.49 per cent gain a year ago.
The last time Temasek saw a negative one-year return was in 2016, when declines in the share prices of its listed investments pulled down the rate to -9.02 per cent.
This figure had also dipped below zero during previous crises – it was about -30 per cent in 2009 during the global financial crisis and about -19 per cent amid the Severe Acute Respiratory Syndrome (SARS) outbreak in 2003.
Ms Png Chin Yee, deputy chief financial officer and head of financial services, said at a virtual press conference that the one-year shareholder return needs to be seen in the context of how global markets hit the troughs in the quarter up to Mar 31 with the onset of the COVID-19 pandemic.
Asked by CNA if the return rate could remain negative in the next financial year, she replied that global markets have recovered from its lows since end-March. “So that should give you an indication as to where we stand,” Ms Png added.
Despite the drop in the last financial year, Temasek said its net portfolio value was up S$120 billion over the past 10 years and has nearly tripled since two decades ago.
Its 10-year total shareholder return was at 5 per cent, while the 20-year equivalent stood at 6 per cent, it said in a press release.
The figures released on Tuesday as part of its final audited consolidated group financials and portfolio performance were similar to the preliminary numbers it announced in July. Citing disruptions amid the COVID-19 pandemic, the Singapore state investment firm had delayed its usual annual reporting from July to September this year.
“The pandemic cut short a promising end to our performance this year but the resilience of our portfolio came through for us,” said Mr Yeoh Keat Chuan, senior managing director of the enterprise development group and deputy head of its Singapore projects.
This resiliency boiled down to Temasek’s “limited exposure” to the badly-hit travel, hospitality and entertainment sectors, said Mr Yeoh at the same press conference.
“We ended the year with a strong and resilient balance sheet. This gives us the flexibility to invest in the longer term, right through market dislocations and reposition our portfolio for the post COVID-19 recovery,” he added.
BREAKDOWN OF PORTFOLIO
In its annual report, Temasek said it invested S$32 billion and divested S$26 billion in the last financial year.
Again, the United States accounted for the largest share of new investments, followed by China and Singapore.
Overall, Asia remained the anchor of Temasek’s portfolio at 66 per cent, with China (29 per cent) and Singapore (24 per cent) remaining the top two markets.
Temasek said it has continued to grow its exposure in North America (17 per cent) where it sees opportunities in line with key structural trends. Together with Europe (10 per cent), these two developed markets now form more than a quarter of its underlying portfolio exposure.
The financial services (23 per cent) remained the biggest sector in its portfolio, with an increased exposure to the payments sector and other non-bank financial services companies.
Temasek said it added to its stakes in PayPal, Mastercard and Visa, as well as invested in promising emerging firms such as Blend, a US-based digital lending platform for mortgages and consumer banking.
Technology, and life sciences and healthcare were other areas it invested in.
In the technology sector, Temasek invested in Duck Creek Technologies, a US-based software provider to the property and casualty insurance industry, and European home improvement product e-marketplace ManoMano.
In the life sciences and healthcare space, it invested in biopharmaceutical companies developing new drugs and therapeutic solutions such as US-based Beam Therapeutics and Coherus BioSciences.
In Singapore, it backed homegrown cashback platform ShopBack and plant-based meat alternative maker Growthwell Group.
These are longer-term growth opportunities that complement its exposure in major Singapore firms, as well as efforts by its investment firm Heliconia Capital to help small- and medium-sized enterprises scale beyond Singapore, it said.
Temasek said the outlook for the global market remains volatile and uncertain, with the resurgence of COVID-19 infections in some countries threatening to derail recovery.
It also noted concerns about rising geopolitical and trade tensions caused by the US-China strategic rivalry and the US presidential election in November.
“The unpredictable paths of COVID-19 and geopolitical issues pose significant uncertainties in the near term,” said Ms Png in the press release.
“We will stay watchful and remain disciplined in our investment approach, as we focus on building a portfolio that will benefit from policy tailwinds and is resilient in the long term."
Despite the challenges, the pandemic has “amplified and accelerated” certain structural trends and one way for Temasek to shape its portfolio for the future is “to seek innovative companies at the forefront of developing new, sometimes disruptive, solutions that create new opportunities”, said Mr Yeoh.
Some of these trends include e-commerce and digital payments, which have seen an acceleration in recent months and are “here to stay”, said Ms Png, adding that this is why Temasek has taken the opportunity to deepen its exposure in the payments space.
She said: “What we’ll like to do is to really take a look at trends that we’ve identified, see what’s relevant, what’s accelerated and make bigger bets against those which we think are going to benefit in this environment and coming out of this environment.”
Sustainability also remains at its core, according to Temasek, which said it closed the year with carbon neutrality as a company.
Temasek said it remains committed to halve the net carbon emissions attributable to its portfolio by 2030, with Mr Yeoh noting that the state investor will work closely with its portfolio companies in this area.
It is also committed to a longer-term ambition of net zero emissions by 2050 for its portfolio.
Temasek chairman Lim Boon Heng said: “Ultimately, the purpose of enterprises is to offer sustainable solutions for a better world. Temasek is no different.
“We are a long term investor, institution and steward. We must do things today, with the next one, two or three decades in mind.”
Other questions raised at the virtual press conference include whether Temasek would consider another round of company-wide salary freeze.
It did so in February, when it also announced a “partial cut” in the annual bonuses of its senior management team and a voluntary pay cut scheme for the senior management.
Mr Dilhan Pillay Sandrasegara, CEO of Temasek International, said savings from these cost-cutting measures went towards supporting various COVID-19 initiatives in the community.
“Going forward, we have to monitor the situation to see what we need to do with our remuneration for our staff and that is something that we are paying very close attention to,” he added.
“But it’s a bit early to say whether we need to take any further action, one way or another.”