The Singapore Commentator

William Mellor of Bloomberg News looks at Temasek Holdings — in particular, its performance under Ho Ching. Excerpt:

An investor meets her match
Since Ho became Temasek’s chief in 2002, the group’s returns have soared... “Historical returns in Temasek-linked companies have not been impressive,” says Prabodh Agarwal, CLSA’s Singapore-based head of research. That has changed, he says. “Temasek-linked companies are much better investment propositions than ever before.”

CLSA estimates that total returns to shareholders of Temasek’s publicly traded companies were 15 percent over two years and 33 percent in the year that ended in August, compared with a 1.6 percent decline during the decade that ended in August. Temasek...says its own returns on its entire portfolio...were 3 percent over 10 years, 8 percent over two years and 46 percent in the year that ended in March...

Ho’s plan to double Temasek’s presence in Asia outside of Japan and Singapore to 33 percent of its total investments from the current 16 percent may cost 24 billion Singapore dollars over 10 years, says Lim Jit Soon, head of Singapore research at Citigroup Global Markets. Greg Pau, S&P’s Singapore-based director of corporate ratings, says, “Any company going into unfamiliar territory typically pays a tuition fee.”

Alan Cockshaw, a director of CapitaLand, says that not expanding might be even riskier, particularly with a small domestic market such as Singapore’s...

One recent investment that soured was China Aviation Oil, which in November reported $550 million of losses from trading oil derivatives...

Temasek’s own companies stumble at times. “They’re very smart guys at Temasek, and you have some well-run companies in the stable, but you also have some not-so-great ones,” says Hugh Young, the Singapore-based managing director of Aberdeen Asset Management. Chartered Semiconductor Manufacturing, a Singapore and Nasdaq-listed company that has not made an annual profit since 2000, is one such example, Young says.

The government’s dominant role in running companies may also be to blame, says Linda Lim, a Singaporean who is professor of corporate strategy and international business at the University of Michigan in Ann Arbor.

“Temasek’s overall rates of return may have been dragged down by the kinds of things they invested in for national strategy rather than pure financial return,” Lim says. “The role of the state in business has become at best unnecessary and at worst dysfunctional.”

On a lighter note: Somebody seems to have confused Singapore’s CISCO with US network equipment provider Cisco Systems.

Singapore Nationalizes CISCO
CISCO is getting nationalized into a new company, wholly owned by the Singapore government. It’s true. And those CISCO uniforms will be changing as well, to a new design that won’t include the insignia of the Singapore police force...

“CISCO” happens to be the name of the auxiliary police force in Singapore, an organization established in 1972. This CISCO deals in bodyguards, armored cars, alarm systems, and the like -- not to be confused with the U.S.-based networking equipment provider, Cisco Systems Inc. Last summer, Singapore’s Ministry of Home Affairs announced plans to corporatize CISCO, freeing it of the restrictions placed on government agencies; the change in uniforms was announced yesterday.

A Cisco Systems spokeswoman says she’d never heard of CISCO and was initially taken aback upon seeing the story in the Singapore press. “I thought: My goodness, who is this?” she says. “I would think we would have come upon that group before.”...

That may be more likely if CISCO decides to follow in Temasek’s footsteps and expand overseas.