Temasek's 30-year returns a robust 18%

Wow.. 18% over 30 years. I wonder who else could do it slower than them.

Maybe they should just leave the investment to the experts out there instead. I got my 18% in less than a year.

Temasek's 30-year returns a robust 18%

Feb 7, 2006
The Straits Times

WE REFER to The Straits Times Forum letter 'Temasek's returns disappointing' (ST, Feb 3) by Mr Jeffrey Ho Loon Poh.

Temasek measures total shareholder's return (TSR) by both market value and shareholder's funds.

TSR by market value considers the dividends received alongside the changes in market value of a portfolio less net new capital issued. This must necessarily reflect the volatility in the market, specifically the market value at the opening date versus the market value at the closing date.

The TSR results thus depend on which period is being evaluated. This can be seen in the chart below of the composite market capitalization of 11 of the major Temasek-linked companies (TLCs), including SingTel, DBS, SIA, Chartered, STATS ChipPac and others.

The five-year TSR from March 2000 to March 2005 would be drastically different from the five-year TSR from March 1999 to March 2004, depending on the market value at the respective points in time. These changes do not necessarily reflect the underlying profitability of the portfolio companies.

On the other hand, TSR by shareholder's funds considers the dividends received by the shareholder, plus the changes in the underlying net asset value of the portfolio, net of new capital issued. This is driven by the profitability of the businesses rather than the valuation in the stock market. Owners and long-term shareholders would regard these as fundamental to the sustainability of their businesses.

The five-year TSR to March 2005 mentioned by Mr Ho measures off the market high of March 2000 due to the dot.com boom. Thus, the five-year TSR for Temasek (1%), STI (2.7%) and MSCI Singapore Index (0.6%) were generally low but comparable. They are not exactly the same as Temasek portfolio value in 2000 was lifted by its large weightage in the telecoms and technology stocks.

On the other hand, the two-year TSR measures off the low market value of March 2003 in the depths of SARS. Here, Temasek delivered a strong 30%, though this is lower than the 31% for MSCI Singapore Index and 34% for STI. However, Temasek's three-year and 10-year TSR at 11% and 6% outperformed both the MSCI Singapore Index (6.4% and 2%) and STI (9% and 4.3%). Temasek's 30-year TSR remained a robust 18%.

These variations in the TSR numbers reflect the volatility of the market over the last decade or so. As we move into the future, the reported TSR numbers by market value will continue to fluctuate as we measure the different starting points in the past.

Leaving aside the market volatility effect on the market TSR numbers, the TSR by shareholder's funds showed a less volatile pattern, with a robust 9% return over the five years to March 2005, despite SARS and 9/11.

The one-year and two-year TSR by shareholder's funds climbed back to 12% and 14% respectively, signaling a stronger profit flow as the economy recovered. We assure Mr Ho that Temasek has the appropriate system to align management interest with long-term returns.

Eva Ho (Ms)
Director
Corporate Communications
Temasek Holdings (Pte) Ltd