TEXT-S&P summary: Temasek Holdings (Private) Limited

(The following statement was released by the rating agency)

Dec 03 -

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Summary analysis -- Temasek Holdings (Private) Limited ------------ 03-Dec-2012

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CREDIT RATING: AAA/Stable/A-1+ Country: Singapore

Primary SIC: Holding

companies, nec

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Credit Rating History:

Local currency Foreign currency

16-Feb-2011 AAA/A-1+ AAA/A-1+

12-Oct-2004 AAA/-- AAA/--

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Rationale

The 'AAA' corporate credit rating on Temasek Holdings (Private) Limited reflects Standard &

Poor's Ratings Services' assessment that the company's stand-alone credit profile (SACP) is

'aaa'. Our opinion that there is an "extremely high" likelihood that the government of Singapore

(unsolicited rating AAA/Stable/A-1+; axAAA/axA-1+) will provide timely and sufficient

extraordinary support to Temasek in the event of financial distress also supports the ratings.

We assess the company's business risk profile to be "excellent" and its financial risk profile

to be "minimal," as defined in our criteria.

In accordance with our criteria for government-related entities (GRE), our assessment of the

"extremely high" likelihood of extraordinary government support is based on the following

characteristics of Temasek:

-- "Critical" importance to the Singapore government due to the company's shareholding in

some sectors that Standard & Poor's believes are strategic for the Singapore economy. For

example, Temasek is the largest shareholder of the defense and engineering group Singapore

Technologies Engineering Ltd. (AAA/Stable/--), the country's airline, main subway

operator, power distributor, and container sea-port operator, among others.

-- A "very strong" link with its sole owner, Singapore's government, which is unlikely to

dilute its ownership. The shareholder has the right to appoint the members of the board, subject

to the President's concurrence. As a Fifth Schedule entity under the Singapore Constitution,

Temasek is subject to constitutional safeguards where the President of Singapore has an

independent role to safeguard Temasek's past reserves.

Our assessment of Temasek's SACP reflects our rating methodology for investment holding and

operating holding companies. We consider Temasek to be an operating holding company. Our credit

considerations are, therefore, the liquidity and diversity of Temasek's portfolio, and the

credit quality of its investments.

A factor we considered is the number of core holdings (Standard & Poor's defines these as

investments held over several years) in the portfolio. In Temasek's case, we assess this factor

favorably as we estimate that the company has more than 20 core holdings. In analyzing Temasek,

we believe the company manages its assets on a portfolio basis and will adjust its portfolio

from time to time to realize value based on its return considerations. Another factor is the

company's leverage, which we measure as net debt as a percentage of the investment portfolio

value. Temasek's cash and short-term investments significantly exceeded its debt at the end of

the fiscal year ended March 31, 2012; the company has been in a net cash position for at least

the past nine years.

In our opinion, Temasek's SACP benefits from the company's consistent record of generating

positive returns from a diversified and high-quality investment portfolio. Temasek's investment

returns--defined as its total shareholder return (annual market value changes of the portfolio

plus dividends to shareholder net of any new capital received)--have been reasonably good, with

five-year and 10-year returns at 3% and 10%, respectively. Total shareholder return for fiscal

2012 was 1%, which is satisfactory given the weak and volatile investment conditions.

Temasek's SACP also reflects the company's conservative financial management. We believe

Temasek will maintain minimal debt and exceptional liquidity, as well as generate strong

recurring cash flows from its divestment proceeds, and steady dividends from its investee

companies. Since the financial crisis in 2008, Temasek has significantly increased its cash

holdings, which provide it with strong financial flexibility and a liquidity buffer to weather

adverse investment and economic conditions.

In our base-case scenario, we expect the company to maintain minimal debt and leverage, with

a ratio of unconsolidated net debt to portfolio value well below 30% in fiscal years 2013 and

2014. We have assumed materially lower dividend income and an investment outlay equivalent to

the past nine years' average of about Singapore dollar (S$) 15 billion. This reflects our view

that Temasek will adopt a more cautious investment approach in the next 12-18 months, given the

uncertain global economic and market outlook. We also expect the credit profiles of Temasek's

key investee companies to remain stable. These companies, which we rate 'A-' or higher, make up

49% of Temasek's portfolio as of March 31, 2012.

We believe Temasek can fully meet its debt obligations even in a severe economic downturn.

We estimate that, even if the value of the company's investment portfolio as of March 31, 2012,

declines by 85%, the residual investments would still comfortably cover its total debt

outstanding.

Temasek remains exposed to the banking and financial services sectors, and to growth

regions. These two segments currently account for 31% (36% at March 31, 2011) and 42% (45% at

March 31, 2011), respectively, of the company's total investment portfolio. However, the

following factors mitigate the risks from these exposures:

-- Temasek has a diversified portfolio with positions in many industries, including stable

businesses such as telecommunications, ports, and defense and engineering; 80% of its dividends

inflow comes from investments in companies that we rate 'A-' or higher;

-- The credit quality of its investment positions in banks and financial services is at

least intermediate; and

-- Investments in matured markets account for 58% of the company's portfolio as of March 31,

2012.

Temasek also has the flexibility to adjust its investment strategy to temper investment

risks and reduce borrowings during extreme market volatilities, as it did during the 2008-2009

global financial crisis.

In our view, Temasek's annual information disclosure is still not on par with other

companies with similar ratings (these companies are listed). However, the content of information

has been improving over the past four years. Nevertheless, we believe Temasek's long and

consistent record of large liquidity reserves (reflected in the net cash position for the past

nine years), minimal debt, and policies favoring strong liquidity during volatile years indicate

its prudent financial management.

Given Temasek's SACP, its corporate credit rating is 'AAA' by its own merits, based on the

above credit factors and our view of ongoing support from its sole shareholder. Accordingly, the

benefit from this extremely high likelihood of extraordinary government support would

materialize if we lower Temasek's SACP. The corporate credit rating on Temasek would only be

affected if the SACP weakens to the 'a' category.

Source: http://news.yahoo.com/text-p-summary-temasek-holdings-private-limited-073620183--sector.html

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