The key to infusing some excitement into Singapore’s sleepy stock market is to make special situations such as acquisitions and privatizations more competitive, with the state’s investment arm contesting against itself if nobody else turns up.
That seems to be the message from the takeover battle for Singapore Press Holdings Ltd.’s property assets. It started out as a humdrum S$2.099 per share offer to SPH investors by Keppel Corp Ltd., an infrastructure conglomerate in which state investor Temasek Holdings Pte. is the largest shareholder. But thanks to the emergence of a rival bid, for which Temasek-linked entities joined hands with a hotelier, shareholders can now improve their take to as much as S$2.40.
That’s a 60% premium over SPH’s stock price of S$1.5 in March when the board began its strategic review. Multiply the difference of S$0.9 by 1.6 billion shares, and the SPH board can pat itself on the back for potentially releasing S$1.4 billion ($1 billion) of wealth. However, this unlocking of value, most of which is now reflected in the share price, only became possible because Temasek portfolio companies CLA Real Estate Holdings Pte. and Mapletree Investments Pte. backed 60% of the rival bid, with the other 40% helmed by hospitality tycoon Ong Beng Seng.
Without Temasek taking on Temasek, things wouldn’t have gone so well. Following the announcement of strategic review, SPH, the publisher of The Straits Times, decided in May to hive off its media business into a not-for-profit entity, and sell the rest, including shopping malls located in Singapore and Australia, student accommodation assets in the U.K. and Germany, and a nursing home chain in its home city.
Even so, in early November, the Securities Investors Association (Singapore) was unhappy that the offers on the table for a pure-play property firm were below its net asset value. Then came the improved bids. In theory, SPH shareholders can still reject both suitors and keep their company listed. But now at least they have a real choice, which hasn’t always been the case. When Bloomberg News wrote about “the incredible shrinking Singapore stock market” in early 2019, more firms were leaving than coming in, and low-ball offers were common. So much so that later that year the Singapore Exchange tightened the norms for voluntary delisting to give minority investors a better shake.
Still, the market remains lackluster. Ten years ago, the value of shares changing hands during any quarter routinely topped the Asian financial center’s gross domestic product. Nowadays trading interest in the city of 5.5 million people is lucky to exceed 70% of GDP. Let alone Hong Kong, as a fund-raising venue in Asia even emerging markets like Thailand and India have done better than Singapore over the past five years. Meanwhile, the pressure from exits is still heavy, at the rate of more than one firm a month.
That’s where Temasek comes in. Almost a quarter of the state investment firm’s $283 billion global portfolio is in Singapore. The behemoths on that list, such as DBS Group Holdings Ltd., Singapore Telecommunications Ltd., CapitaLand Investment Ltd. and Singapore Airlines Ltd., are much sought after by the city’s aging population because of their juicy dividends and the solidity that comes from having a triple-A-rated sovereign in their corner. For instance, while Covid-19 has inflicted a severe blow to the travel industry, Singapore Airlines investors know that their pre-pandemic dividend yield of 3% to 4% will resume when growth returns to normal.
But how long will Temasek’s portfolio companies go on handing out large dividend checks to an investor base that’s easy to please but hard to excite? Being in a boring market makes them perceived as staid, too. That might explain why CapitaLand Ltd., the developer behind some of Singapore’s most iconic landmarks, such as Raffles City and Clarke Quay, has packed off the cranes and excavators to a private company and refloated itself on the market as one of the world’s largest real-estate investment managers, free of the dust and noise of construction.
A different kind of buzz in the Singapore stock market, one that makes equities sexy to crypto-loving Millennials and Gen Z investors, will be very welcome, and large companies with ties to the government will have to take the lead in providing it. Some of that work will involve making the broader market more contestable. Take SPH, which isn’t a Temasek ward. (The Singapore government exercises its control on the publisher’s ownership via the Newspaper and Printing Presses Act.) But even here, entities linked to the state investor still found it worthwhile to add some thrill to the sale of its nonmedia assets.
Making special situations really special for minority shareholders in Singapore could also make everyday trading in the city more compelling. –Bloomberg