Temasek remains shrouded in mist
Despite promises to demystify operations of the financial juggernaut, the move on NOL leaves market in the dark
When Ho Ching, the executive director of Singapore's giant state-owned Temasek Holdings gave an address at the island state's Institute of Policy Studies earlier this year, she found herself talking to a very attentive audience.
Not only did Ms Ho use the speech to reveal Temasek's investment record for the first time in 30 years, she also said she was keen to 'demystify' the operations of the secretive holding company that has been used by the Singaporean government to pour as much as S$500 billion (HK$2.25 trillion) into state-affiliated firms since 1974.
Yet the demystification process promised by Ms Ho, who is also the wife of Singapore's incoming prime minister Lee Hsien Loong, appears to have shed little light on Temasek's latest corporate play.
After the Singapore market closed on Tuesday, Temasek announced that it was launching a S$2.8 billion bid for the 70 per cent or so of shares it doesn't already own in Neptune Orient Lines (NOL), the seventh-largest container shipping firm in the world.
Many of the analysts who cover NOL have spent the past few days trying to work out exactly what Temasek hopes to achieve. 'It's difficult to comment because Temasek's policy is complicated and the direction of the transaction is not yet clear,' admitted one Hong Kong-based analyst who covers NOL and other regional shipping stock for a major American investment bank.
Jesvinder Sandhu, a transport analyst with Singapore's OCBC Bank, said: 'Temasek's rationale for the offer is unclear at this stage.'
Those analysts prepared to speculate on the motives behind the surprise bid for NOL have focused on the possibility that Temasek could be looking to consolidate the cluster of companies it already controls in Singapore's transportation and logistics sector.
Having spent the past three decades or so accumulating government surpluses that local academics Tan Khee Giap and Chen Kang estimate could be worth as much as S$800 billion, the government has not been afraid to use its financial clout to build industries it considers to be important to economic development.
Temasek now holds strategic stakes in companies including the likes of Singapore Telecommunications, Singapore Airlines and the unlisted PSA Corporation, which operates the world's second-busiest container port after Hong Kong. Singapore's government-linked companies (GLC) account for between 33 and 41 per cent of the value of the Straits Times Index, according to Nanyang Technological University and investment bank ING Barings.
Christopher Gee from JPMorgan reckons that if Temasek is looking to consolidate the island's transportation and logistics industry, then other GLCs such as SembCorp Logistics (SembLog), PSA Corp, Keppel Logistics and CWT Distribution could also be in play.
JPMorgan this week went overweight on SembLog, arguing in a research note that it 'could be the next candidate to be taken private after NOL'.
UBS Warburg has a similar perspective on the NOL offer, although it thinks that Temasek may move next on the conglomerate SembCorp Industries, which owns about 60 per cent of SembLog.
Investors seem to be making a similar punt, driving up the price of Temasek-related transportation and logistics stocks since the NOL bid was first announced late on Tuesday.
But there are some potential holes in this type of consolidation theory. One reason why Temasek may not want to take NOL private is that this would turn NOL's profitable shipping-liner arm APL into what the US Shipping Act refers to as a 'controlled carrier'.
This would make it far more difficult for APL to adjust tariff rates on trade with the US and restrict its use of non-vessel operating common carriers which consolidate small shipments into container loads that move under one bill of lading, cutting costs for smaller shippers.
Which is why some analysts think Temasek's move may actually have nothing to do with industry consolidation, but merely be a defensive play to prevent a hostile bid by a foreign company.
Temasek has done little to clarify its intentions. Part of the problem seems to be that - more than two years after Ms Ho took over the helm - Temasek can often give the impression that it still does not quite know what exactly it wants to be.
The much-lauded Temasek Charter unveiled several months after Ms Ho took over was supposed to solve this problem, with its commitment that Temasek would help broaden and deepen Singapore's economic base 'by nurturing successful and vibrant international businesses from its stable of companies'.
But much of Temasek's activity since the introduction of the charter in June 2002 has been directed externally, such as its recent acquisition of a 9.1 per cent stake in Korea's Hana Bank.
Wong Wei Kong, a columnist with the local Business Times newspaper, claims that Temasek's corporate plays will almost always create a flurry of interest and raise speculation about the holding company's ultimate intentions.
