Sweeping restructuring efforts on the cards for Temasek-linked firms: report

Brace for more mergers and divestments.

Government-Linked Companies (GLCs) play a crucial role in Singapore's equity markets, constituting over a fourth of the local bourse's total market capitalization.

A report by Morgan Stanley revealed that sweeping restructuring efforts loom over the horizon for these firms, reflecting the government's push to turn Singapore into a value-creating economy.

These changes include consolidation for firms that compete within the same sector, rapid internalization and more divestments.

"We believe that with value creation emerging as a new strategy, potential consolidation is plausible, which would bring potential scale and synergy benefits.These restructuring initiatives could create large size and scale, potentially giving these companies more leverage to embark on large-scale global acquisitions," the report said.

In terms of internalisation, Morgan Stanley said that sovereign wealth fund Temasek will likely push firms to embark on more overseas mergers and acquisitions.

Temasek is also expected to reduce its stake in several GLCs that no longer serve its investment objectives.

"We find it plausible that Temasek,Singapore’s sovereign wealth fund, may continue to divest its non-strategic GLCs and that it may also reduce stakes in a few of the listed GLCs. Actions by Temasek and the government suggest a change in mindset implying that private enterprise– and not the government– is best able to exploit evolving market trends and technologies. Hence,Temasek could reduce its stake in GLCs to drive its objective of total returns rather than being a caretaker of government assets,” the report said.