Expect higher returns from Temasek-linked firms as government hikes spending

Listed firms under its portfolio have an ROE of at least 12%.

Temasek-linked firms could provide investors higher returns as the government increases social spending.

According to a report by DBS, Temasek’s inclusion in the Net Investment Returns framework in the 2015 budget will cause investors to focus on the potential for higher shareholders’ returns for listed firms under the institutional investor’s portfolio.

The report showed that most of Temasek-linked firms listed on the SGX-listed have an ROE of at least 12%, with property names and REITs showing a 6.5% to 7.6% ROE, which is in line with industry peers.

However, companies such as NOL, Tigerair, and SIA have lower ROEs on back of challenging conditions in their respective industries i.e. container shipping and airlines.

“Investors are likely to focus on the potential for higher shareholders’ returns for these companies through a) optimal use of capital structure b) seeking inorganic earnings growth, c) ways to sustain long term competitiveness in the global arena, and d) higher dividend payout for cash rich companies,” stated the report.