Temasek annual profit doubles

The sovereign fund has doubled its profits to S$18.2bn although the size of its real estate portfolio has fallen by two percent in the past year. As the credit market fallout continues, Temasek has indicated it will continue to do direct deals in financial services.

Temasek Holdings, one of two Singaporean sovereign wealth funds, registered an annual profit of S$18.2 billion ($12.8 billion; €8.8 billion) for the financial year ending March 2008, double that of last year. It said that the profits were realised based on the back of strong returns from existing portfolio companies and gains realised from the divestments of its assets.

Temasek, which is owned by Singapore's Ministry of Finance, is an active investor in the private equity and real estate asset classes, as well as making direct private equity and real estate investments.

Temasek owns the real estate investment company Mapletree, which in May held its first close on the $1.5 billion (€955 million) Mapletree India-China Fund. Local media reports suggest the fund could close as high as $2 billion. Mapletree targets the office, logistics, industrial, business park and retail/lifestyle sectors.

Temasek, which released its annual results yesterday, said that the value of its portfolio increased from S$164 million to S$185 million, a 13 percent rise. However, part of the rise in portfolio size is attributable to a capital injection of S$10 billion by Singapore’s Ministry of Finance, which owns Temasek. Taking the capital injection into account, the total shareholder return by market value increased by a modest seven percent.

Total investments for the year stood at S$32 billion as compared with S$16 billion in the preceding year. In what was a very active year for Temasek, its divestments amounted to S$17 billion. Temasek’s net investments outside of Asia, which stood at S$10 billion, exceeded net investments in Asia, which stood at S$5 billion, for the first time. However, this was primarily due to S$12 billion of divestments in Asia.

While Temasek recorded its highest ever profits in the last financial year, its chairman S Dhanabalan warned that opportunities may be limited in the coming months.

“The fallout of the credit crisis will continue to dampen the global economy over the next 24 months, with sharply escalated oil and food prives beginning to test inflation expectations,” he said in Temasek's annual review. He added that Temasek is concerned with “the emerging risks of stagflation” as it “presents huge socio-political as well as economic risks in the next three to five years”.

A majority of Temasek's portfolio remains concentrated in the financial services sector. The sector accounts for forty percent of the firm's portfolio. Over the last year, Temasek invested $8.3 billion (€5.7 billion) in Merrill Lynch and $2 billion in Barclays. Temasek's real estate portfolio decreased two percent between 2007 and 2008, from nine percent last year to seven percent this year.

Temasek currently has offices in Singapore, Mumbai, Beijing, Shanghai, Hong Kong and Mexico City, where it opened an office earlier this year in May. It is also opening an office in Sao Paolo later this year. The firm said that while its primary focus is still on Asia, it is open to increasing its exposure to other markets such as Latin America and Russia through both, direct investments and funds.