Yahoo Finance Temasek Holdings is Setting its Sights on Europe: Should You Follow Suit?
Singapore-headquartered investment company, Temasek Holdings, has opened a new office in Paris on 11 April 2024.
This is Temasek’s third office in Europe, alongside its London and Brussels counterparts.
The investment firm stated that its Paris office will expand Temasek’s global coverage, furthering its mission to construct a robust portfolio for the future under its 2030 strategy.
Furthermore, the inauguration of the Paris office underscores the importance of the Europe, Middle East, and Africa (EMEA) region to Temasek.
Since 2011, Temasek’s exposure to the EMEA region has increased nearly fivefold. It now constitutes 12% of its portfolio as of 31 March 2023.
Attractive industries in Europe
Europe’s economy fared poorly last year, narrowly avoiding a recession in the second half of 2023.
High inflation, driven by rising energy prices and high interest rates, are some factors driving demand down.
So, what does Temasek see in Europe and the broader EMEA region?
2024 has proven to be more favourable for the region.
Inflation has eased gradually, accompanied by expectations of rate cuts.
Unemployment is also at a record low, with the Purchasing Managers’ Index (PMI) for manufacturing and service rebounding this year.
All these indicators point to a resurgence in economic activity.
2024 is poised to be a pivotal year for Europe to regain the momentum lost since the pandemic.
Despite a slowdown in Europe’s economy, some industries within Europe have demonstrated resilience. For example, renewable energy continues to grow in capacity as the region prioritises energy independence.
Likewise, Europe has maintained its reputation as a premier luxury goods market, with sales regaining top position in 2023.
Temasek recognises Europe’s excellence across various sectors, including sustainable solutions, pharmaceutical or biotech, consumer goods, financial services, technology, and transportation and logistics.
Temasek also acknowledges the steady progress the Middle East and Africa are making.
How do I invest in Europe?
If you are interested in investing in European companies, several brokers are available to assist you.
Our broker guide will help you determine which broker is most suitable for you.
Fret not, investing in European companies can be made simple using American depositary receipts (ADRs).
An ADR is a certificate issued by a US bank that represents shares in foreign stocks.
There are a significant number of European ADRs listed on US exchanges.
We will explore promising companies in some of the sectors identified by Temasek Holdings as having growth potential.
Consumer Goods: LVMH Moët Hennessy Louis Vuitton (OTCMKTS: LVMUY)
LVMH Moët Hennessy Louis Vuitton (LVMH) recently hit the headlines with its CEO, Bernard Arnault, claiming the title of richest man on earth.
LVMH owns some of the world’s most prestigious brands in various sectors, including fashion, perfumes and watches.
Among its well-known brands are Louis Vuitton and Christian Dior in its fashion division, Maison Francis in its perfume division, and Hublot in its watches division.
For the first quarter of fiscal year 2024 (1Q 2024), LVMH announced a slight decrease in net sales. Net sales dipped by 1.6% year on year, from €21.0 billion to €20.7 billion.
However, this downturn was mainly driven by currency effects. Organic sales grew by 3% year on year despite tight macroenvironments across China and Europe.
Asia and the US are the hot markets for luxury goods, together accounting for over half of LVMH’s total sales.
Notably, sales in Japan saw a substantial increase, registering double-digit year on year growth.
The fashion conglomerate will be participating actively in the Paris 2024 Olympics.
LVMH is involved in the design of the medals and forming partnerships with French athletes, initiatives that are expected to elevate the company’s brand name and prestige.
Pharmaceutical: Novartis AG (NYSE: NVS)
Novartis is an innovative pharmaceutical company based in Switzerland.
It researches and produces treatments for several diseases, with a focus on cardiovascular, renal, immunology, neuroscience, and oncology among other areas.
In addition to these fields, the company is also investing in technology platforms to spur further growth and competitiveness.
The pharmaceutical giant currently boasts an established platform in chemistry and biotherapeutics, with three emerging platforms in development for gene & cell therapy, radioligand therapy and xRNA).
While based in Europe, its key geographical priorities are the US, China, Germany, and Japan, with the US market generating more than one-third of its total sales.
For 1Q 2024, Novartis delivered another robust performance.
Total sales grew by 9.5%, from US$10.8 billion to US$11.8 billion year on year.
Net profit recorded a more impressive rise, jumping 25.0% year on year, from US$2.2 billion to US$2.7 billion, driven by improved operating margins.
However, free cash flow declined by 24.1% year on year due to a one-off payment and movements in working capital.
Continuing its tradition of innovation, Novartis has four drugs pending registration.
The company has also raised its full-year guidance, expecting total sales to increase by high single to low-double digits, and core operating income to grow low double-digit to mid-teens.
Lastly, Novartis consistently rewards shareholders, having increased its annual dividend for 27 consecutive years, with its most recent dividend at 3.30 CHF per share, or approximately US$3.78 per share.
Technology: ASML Holdings (NASDAQ: ASML)
US technology companies have long dominated headlines, especially with the prominence of the ‘Magnificent 7’.
Likewise, with the burgeoning semiconductor industry across the Asia-Pacific region, European technology companies tend to be overlooked.
ASML, a Dutch-based manufacturer of chip-making equipment which is a heavyweight in the industry, is a notable exception.
The company holds a near-monopoly of one of the most intricate processes of chip-making as one of the world’s only suppliers of Extreme Ultraviolet Lithography machines.
ASML supplies these equipment to global chipmakers such as Intel (NASDAQ: INTC), Samsung (KRX: 005930) and Taiwan Semiconductor Manufacturing Company (NYSE: TSM).
In 1Q 2024, the company reported €5.3 billion in revenue, a 21.6% year on year decline.
Likewise, net profit also experienced a significant 37.4% year on year drop, falling from €2.0 billion to €1.2 billion.
Despite the steep decline in both its top and bottom line performance, the company anticipates a rebound in the second half of this year, citing a recovery from the previous year’s downturn.
Furthermore, even with orders from the US to limit supply of equipment to China, sales to China remained strong this quarter.
Looking ahead, ASML expects 2025 to be a strong year following the cyclical upturn in the semiconductor end markets.
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Disclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.
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