Top Stock Market Highlights of the Week: Temasek Holdings, ComfortDelGro and Manulife US REIT

Welcome to the latest edition of top stock market highlights.

Temasek Holdings

Temasek Holdings had just released its 2023 Annual Review where the investment firm saw its one-year total shareholder return turn negative.

Despite the weak result, Temasek remains steadfast in looking for opportunities to deploy capital.

India has come up on its radar as a good place for investments.

Temasek is sourcing strategic partners to deploy between US$3 billion to US$5 billion per year in the world’s most populous country.

India head Ravi Lambah mentioned that its Indian team plans to hire four to five investment professionals to increase the team to more than 20 staff.

Temasek could invest as much as US$10 billion in the next three years through a mix of partnerships and by injecting capital into public equities.

Around 60% of the investment firm’s Indian investments are direct stakes in financial services companies.

The rest comprise indirect exposure to the country’s telco Bharti Airtel through its investment in Singtel (SGX: Z74) and Indian airline Vistara through its ownership of Singapore Airlines Limited (SGX: C6L).

Temasek has identified four key investment themes for the decade – the future of consumption, sustainable living, longer lifespans, and digitalisation.

India offers investments that fit all these themes and also enjoys government stability and consistency in policy.

ComfortDelGro Corporation Ltd (SGX: C52)

ComfortDelGro Corporation, or CDG, has been awarded a contract to operate rail services in Paris, the capital of France.

This landmark win marks CDG’s first foray into France and is also a first by a Singapore company.

The contract was awarded to ORA, an international consortium comprising CDG and two French companies – RATP Dev and Alstom SA (EPA: ALO), by France’s transport authority.

RATP Dev is a global operator of urban and inter-urban transport systems and specialises in the operation and maintenance of automated metros.

Alstom deals with sustainable and intelligent mobility solutions and engages in predictive maintenance.

CDG is contributing its expertise in ensuring an enjoyable passenger experience.

The contract is for an initial term of six years with an option to extend for three more years.

ORA will operate and maintain metro services for the South sector of Line 15, a new automated line in the Greater Paris region, across 16 stations that pass through 22 cities.

This line is part of the Grand Paris Express projects that are slated for commencement by the end of 2025 with 390.000 daily riders expected.

Chairman of CDG, Mark Greaves, remarked that the group’s entry into the international rail sector is part of management’s long-term strategy to grow beyond taxis and buses.

The business has been adding personnel who are experts in rail tendering and operations to bolster the division.

With the latest contract win, CDG’s international rail network will increase by 16% to 210 kilometres.

Meanwhile, the land transport giant is also participating in a rail tender in Stockholm, Sweden.

Manulife US REIT (SGX: BTOU)

It seems like the troubles never end for Manulife US REIT, or MUST.

The manager obtained the latest valuations for properties owned by the REIT as of 30 June 2023, and the overall real estate valuation has declined by 14.6% to US$1.63 billion.

The decline was attributed to higher discount rates used as interest rates have risen across the board, along with weak occupancy in the US office market due to a slowdown in demand and leasing activity.

Recall that MUST experienced a 10.9% year-on-year drop in valuation back in 2022, bringing its aggregate leverage to 48.8%.

The manager believes that office valuations will likely decline further for 2023 as the Greenstreet Commercial Property Price Index estimates that office values had plunged by 27% over the last 12 months for the period ending 30 June 2023.

As a result of the fall in valuation, MUST’s aggregate leverage has jumped to around 57%, higher than the maximum permissible gearing allowed by the Monetary Authority of Singapore.

However, because the limit was exceeded due to reasons beyond the manager’s control, the situation is not treated as a breach.

Concerning financial covenants, the manager has disclosed that the ratio of total unencumbered debt to total unencumbered assets cannot be more than 60%.

Because of the updated valuations, this ratio has edged to 60.2%, slightly above the limit set by MUST’s lenders.

The manager is seeking a waiver of this condition as a breach would imply a cross-default of MUST’s interest rate swaps, which will then raise the interest cost for the REIT’s loans.

Meanwhile, MUST is also in discussion with its lenders as to whether the commercial REIT can declare distributions because of the breach mentioned above.

If no distribution can be paid, additional taxes will require to be paid, piling further pressure on the embattled REIT manager.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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