Temasek Holdings, the investment company owned by the government of Singapore, has been the subject of much speculation recently.
While the global Covid-19 pandemic has devastated economic activity and impacted many companies, the stock market itself has been strangely buoyant.
While the U.S.'s Standard & Poor 500 index plummeted 34 per cent from its mid-February peak on March 23, but rallied strongly by June and July 2020.
According to CNBC, this is because the stock market is different from the economy, and investors are looking to the future with optimism.
So what does this have to do with Temasek?
Despite reports of its shareholdings losing some value, it may not be as badly affected as some might think at a first glance.
Ho Ching's Facebook post
CEO Ho Ching shared a Facebook post on July 7, shedding a little light on the company's performance. It may have been overlooked due to the heat of the general election, but it's worth taking a second look.
First, Ho made the point that Temasek has reported on its portfolio performance and financials every year for the past 15 years, and emphasised that this was a "report card" of Temasek as a long-term investor, and not just its performance over the past few months.
Secondly, Ho revealed that Temasek's publicly-listed major investments makes up about 60 per cent of Temasek's portfolio.
And she added that by tracking these, you can get a "pretty accurate sense" of how the company is doing. And she also said that she was impressed by "some folks" who used publicly available data to calculate that as of the end of March 2020, its portfolio is worth over S$300 billion.
That got us thinking.
If some randos on the Internet could delve into Temasek's books to see how hard it has been hit by the pandemic, couldn't we do the same?
Some randos on the Internet try to do math
Now the mountain of information looks intimidating. But when you get down to it, things are pretty straightforward.
First, go download a copy of Temasek Review 2019. You can do so at this link.
You'll see that as of March 31, 2019, it had a portfolio value of S$313 billion. This includes their major investments, which can be found at this link.
These investments are grouped according to their sectors, namely:
- Financial Services
- Telecommunications/Media/Technology
- Consumer and Real Estate
- Transportation and Industrials
- Life Sciences and Agribusiness
- Energy and Resources
Temasek obviously believes in not putting all their eggs in one basket.
How to calculate Temasek's various eggs
First, here's a simple guide to calculating portfolio value from one year to the next.
Imagine Company X issues 50 shares of stock, priced at $2.00 each. Its market capitalisation would therefore be S$100.
If you own half of Company X, or 50 per cent, then the value of your investment would be S$50.
But that's not all you earn. Companies offering shares will also pay out dividends to their shareholders, defined as the "token reward paid to the shareholders for their investment in a company’s equity."
To thank its investors, Company X declares a S$1.00 dividend. Since you own 25 shares of Company X's stock, you'll earn $1 for each share you own, which means another S$25. So the overall value of your portfolio would be S$75.
Therefore, owning shares earns you money in two different ways. That's something to keep in mind when assessing the performance of Temasek's portfolio.
Some assumptions
We're going to assume that Temasek's percentage shareholding in listed companies remains the same in March 2020 as it did in March 2019, with a few key exceptions we'll come to later.
This is because Temasek may have bought a few more shares and sold a few, so we are taking a snapshot in time for March 2020.
We'll do the same for unlisted companies, which are companies not listed on a stock exchange, with their own key exceptions.
Also, we'll assume that when Temasek says they own less than 1 per cent of a company, this means 0.5 per cent. That way, we can still crunch the numbers for those companies.
To look up the market capitalisation of a company, you will need to find out two pieces of information. The first is the "shares outstanding" of the company. This is the total number of shares that are out there in the market.
The second is the share price at a specific point in time. Since Temasek's financial year closes on March 31, let's just use share prices on that date as well. Both these kinds of data can be found on Bloomberg.
Financial services
There are 13 companies listed here, with big names like DBS, Standard Chartered and AIA. Temasek's website shows you how much of a company's stock they own, like so:
Screen shot from Teamsek's website.
From Bloomberg's info, we can calculate that the market cap for the financial services companies.
And with Temasek's info, we can calculate how much of that value Temasek owns according to the percentage of the shares it holds.
But there are certain exceptions. Temasek no longer holds shares in PT Bank Danamon because it merged with another bank in April 2019 and has been fully divested. That means some other company bought Temasek's shares, so they earn money from that. This will be added later.
After some truly heroic number crunching, we determine that Temasek's market cap for its financial services investments in March 2020 stands at S$51.09 billion.
Telecommunications, Media and Technology
Same story as above. We came up with a total of S$41.634 billion from Temasek's shares in big names like Tencent Holdings Limited, Alibaba Group Holding Limited, and Dell Technologies.
Transportation and Industrials
Numbers swirl before our eyes, taunting our humanities-based education. But we persevere, and from Temasek's interests in familiar names like Singapore Airlines Limited, Sembcorp Industries Limited and Keppel Corporation Limited, we emerge with a total of S$35.624 billion.
Consumer and Real Estate
More big names. We crunch sums of money that we could never earn, even in infinite lifetimes. From its shares in companies like Surbana Jurong Pte Ltd and Mapletree, we determine that Temasek gets S$28.379 billion.
Although Capitaland bought Ascendas-Singbridge in June 2019, we've calculated both companies separately.
Life Sciences and Agribusiness
We begin to seriously doubt our choice in careers as we calculate that from Temasek's investment in companies like Bayer AG, it has S$10.454 billion.
Energy and Resources
We've climbed the mountain and reached the summit of numbers. We cling to each other for warmth and safety. Temasek gets S$220.45 million from its investments here, and math no longer seems real to us. Neither does finance.
Anyway, adding everything up, Temasek has a portfolio value of S$167.4 billion for its major investments in 2020.
2019 compared to 2020
We repeat the same process for 2019, the details of which are too gruesome to elaborate. Nevertheless, we find that Temasek's major investments held a portfolio value of S$189.2 billion in 2019.
Therefore, the drop in value is S$21.8 billion, from March 2019 to March 2020.
But don't forget the dividends that Temasek earns, in addition to its portfolio value. With the help of a friend with access to S&P Capital IQ, an online financial platform, we find that Temasek has earned about S$9 billion in dividends and the sale of PT Bank Danamon shares.
Therefore, the drop in value is actually S$12.8 billion.
Now, don't let the huge numbers desensitise you to the fact that S$12.8 billion is still a mind-bogglingly huge amount of money. But way back at the beginning of this article, we noted that Temasek's portfolio value in 2019 was S$313 billion.
So even accounting for this drop? It still holds a value of S$300.2 billion. Which is what Ho said in her Facebook post.
"Some folks used these variously available public data to work out that Temasek’s portfolio value would be north of S$300 billion as at 31 March 2020."
And that's just for major investments. Remember, Temasek has investments in other companies not included in those lists, so the value of its portfolio is likely to be higher.
Report in September
As for the delay, while a couple of random Mothership writers could work out some back-of-the-envelope figures from our bedrooms (because of Work-From-Home), you do not want to entrust crucial calculations like these to people like us.
You need trained professionals with physical access to archives and files and computers and things, for accuracy and security, which Covid-19 has impacted.
Temasek has announced it will delay its annual reporting from July til September this year.
Ho noted that Covid-19 "has delayed the financial reporting for many companies, especially those with operations all over the world".
So we'll see how the math stacks up. But for now, it seems like there's no need to panic.
Mothership Explains is a series where we dig deep into the important, interesting, and confusing going-ons in our world and try to, well, explain them.
This series aims to provide in-depth, easy-to-understand explanations to keep our readers up to date on not just what is going on in the world, but also the "why's".
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Top image by Rachel Ng and Getty.