The Temasek merry go round has started.
Shortly after announcing that LTA will take back the operation of the trains from SMRT, Temasek announced that they will privatize SMRT.
Sometimes we always question whether Temasek is in such a great financial position.
Privatization of SMRT is not a move to enhance shareholders of Temasek because it is a good company. More so, it is a nationalization move to heal a problem by not always being scrutinized.
This means it is no accretive to the shareholders of Temasek.
This morning Temasek and Singtel (Dividend Yield 4.1%) announced that Singtel have entered a conditional share purchase agreement to purchase 21% of InTouch Holdings, which owns Thailand’s AIS and 7.39% of Bharti Airtel for, SG$2.4 billion dollars.
Good Purchase for Singtel Shareholders
Singtel already have stakes in both telecoms and shareholders should be familiar with them. Singtel have a larger stake in Bharti then AIS.
It is more significant to now own a larger stake in AIS. AIS, being Thailand’s largest telecom operator have generated good return on assets based on Singtel past purchase price.
We won’t be sure what is the EV/EBITDA that this is purchased at. It comes at a time that AIS may be reducing their dividends to focus on some capital expenditure.
Bharti has a good story in that, if you look at the country profile that large hedge fund Bridgewater profile as the most competitive on a forward looking basis, India is the country that tops the list.
The entire consideration will be funded by cash.
Temasek in need of money?
Given the timing of this deal, and the ongoing acquisition of SMRT, it begs the question whether Temasek is in need of cash for the purchase.
They should be able to afford privatizing SMRT.
However, we know that at this juncture, if you are a shareholder of Temasek, you wouldn’t be feeling very smug buying fully an asset that is akin to a broken house that you need to fix and selling a cash flow generating good property because it is ‘fully valued’.
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