How Have Government-Linked Companies In Singapore’s Stock Market Fared?

Some investors might look at government-linked companies (or GLCs) as safe investments.

Singapore’s sovereign wealth fund, Temasek Holdings, owns a good number of companies that are listed on the Singapore stock exchange. As of 31 March 2016, Temasek Holdings’ net portfolio value was S$242 billion. Almost 30% of its portfolio was directed towards Singapore.

Investing alongside the Singapore government might sound enticing. But, have Temasek Holdings’ Singapore-listed stocks actually delivered good long-term returns?

To learn more, we can look at a handy report which outlined the performances of 11 Singapore-listed companies that are in Temasek Holdings’ portfolio. Here’re some highlights from the report (figures as of 8 July 2016):

  1. The biggest company in the list would be Singapore Telecommunications Limited (SGX: Z74). The telco weighs in with a market capitalisation of over S$66 billion and is the largest Singapore-listed company. Shares of Singtel have delivered a total return of 68% over the past five years.
  2. Speaking of large companies, DBS Group Holdings Ltd (SGX: D05) is also on the list. The Asian-focused bank – one of the largest in the region by assets – recorded a total return of 25% over the past five years. The past year hasn’t been a good one for the bank’s shares though – the total return over the last 12 months was a negative 21%.
  3. The returns of the duo above pale in comparison with SATS Ltd (SGX: S58). The inflight caterer has been on a tear, locking in a total return of 121% over the past five years. Recently, SATS’s management had shared plans on how it might grow in the future.
  4. It’s not all sunshine and apple pies with the Temasek Holdings portfolio, though. Oil & gas and real estate conglomerate Keppel Corporation Limited (SGX: BN4) has been struggling to cope with lower demand due to low oil prices. Furthermore, a major customer, Sete Brasil, had filed for bankruptcy earlier this year. Keppel Corp’s shares have lost 36% of their value in the last five years.
  5. Sembcorp Industries Limited (SGX: U96), which operates in the utility and marine sectors, has also taken similar hits from low oil prices. Sembcorp Industries is the parent company of SembCorp Marine Ltd (SGX: S51). The latter suffered a net loss in 2015 as it grappled with financial difficulties at Sete Brasil and a weak operating environment. Sembcorp Industries’ shares are down by 35% over the past five years.
  6. Another conglomerate on Temasek Holdings’ list of investments would be Singapore Technologies Engineering Ltd (SGX: S63). The company is involved in multiple sectors, ranging from aerospace and marine to land systems. Shares of the company have a total return of 29.4% over the past five years.

The small sample above suggest that there are factors beyond government ownership that can make or break an investment. Low oil prices, for instance, has wreaked havoc on the fortunes of Keppel Corporation and Sembcorp Industries.

Before committing our hard-earned money to invest in any company, we should be doing due diligence on its fundamentals and its industry.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.