Temasek invests in health-care, consumer firms to tap new growth

Temasek Holdings is increasing investments in consumer, technology and health-care companies as Singapore’s state-investment firm becomes less reliant on financial assets.

The value of its holdings increased 3.7% to a record $223 billion in the 12 months to March 31 from the previous year, while total shareholder return, including dividends, shrunk to 1.5% from 8.9%, it said in its annual review yesterday. The value of its holdings rose 8.6% in the year to March 2013.

Temasek put US$1 billion ($1.24 billion) in U.S. biopharmaceutical firm Gilead Sciences Inc. last year and has made multiple investments in China’s Alibaba Group Holding as Chief Executive Ho Ching steered Temasek’s focus to newer industries with the potential for higher returns. By contrast, the proportion of financial holdings stood at the lowest since 2008 as the value declined.

“This is a new trend in their investment style and we will see more of that in the future,” said Melvyn Teo, professor of finance at Singapore Management University. “They are focusing on highly specialized firms in areas like health care. At the same time they continue to keep an eye on the growing middle classes, mainly in emerging economies.”

Temasek’s share of financial assets, which stood at 40% in 2008, declined by one percenage point to 30% in the year ending March 31. Its holdings in life sciences, consumer and real estate increased to 14% from 12% in 2013, according to the annual review.

‘EMERGING NEEDS’

“As an owner investor for the long term, we are ready to support new ideas to address emerging needs and opportunities, like health care for an aging population, personalized medicine, or e-commerce,” President Lee Theng Kiat said in a statement yesterday.

The firm’s total shareholder return averaged 16% since inception in 1974. The average return was 10.9% over a five-year period, it said.

The Standard & Poor’s 500 Index rallied 19% in the year ended March while the Stoxx Europe 600 Index climbed 14%, outpacing the 1.8% return for the MSCI Asia Pacific Index. The Singapore benchmark stock gauge lost 3.6% in the year.

ACTIVE INVESTOR

Temasek made $24 billion of new investments last year, up from S$20 billion a year earlier, it said.

“This year has been one of our most active years for new investments -- the most active since the global financial crisis -- driven by softer Asian markets of interest, as well as the continued recovery of the global economy,” Chairman Lim Boon Heng said in the statement.

The city-state’s investment firm boosted its stake in the U.S. health-care industry in the first quarter. It bought 5.3 million shares in Thermo Fisher Scientific Inc., a manufacturer of scientific instruments and chemicals, directly or through its units, and 1.6 million shares in BioMarin Pharmaceutical Inc., a developer of therapeutic enzyme products, according to a May 15 filing with the U.S. Securities and Exchange Commission.

Temasek’s liquefied natural gas unit Pavilion Energy Pte said in November it will pay $1.3 billion for a 20% stake in three gas blocks off the shore of Tanzania in east Africa.

‘GREAT DANCE’

Divestments declined to $10 billion from $13 billion a year earlier as Temasek sold shares of Bharti Telecom and Seoul Semiconductor Co., it said. There’s “no great dance of joy with this latest set of results,” said Song Seng Wun, an economist at CIMB Research in Singapore. “It’s a case of steady as she goes as Temasek was able to offset small losses from their core holdings of Singapore and Chinese equities with divestment proceeds, dividends and distributions.”

Investments in Alibaba, Seven Energy International Ltd. in Nigeria, and a gas investment in Tanzania “will certainly help boost their returns in the medium and long term,” he said.

Assets in Singapore rose to 31% from 30% of its holdings, it said. Investments in the rest of Asia were unchanged at 41%, while those in North America and Europe rose to 14% from 12%.