On SG Budget Babe's: The Truth About Temasek vs Chee Soon Juan's Claims

A friend of mine asked me to take a stab at the article from SG Budget Babe about Chee Soon Juan's Claims about Temasek (see below).

This was the first time I have come across this blog. But I was impressed by the quality of her writing and her blogpost. (Ok I know, I'm not here to promote other people's blog. I'm here to analyze, so I'll continue)

She had 3 major investigations:

1) Did Temasek really pay $4 billion for Shin Corp, an "investment that ultimately ended up in smoke?"

SG Budget Babe's (SGBB) analysis led to her conclusion that Temasek made a 57% increase in unrealized gain. Therefore, the "investment did not ultimately end up in smoke."

To run my analysis, I analysed various news report and poured through 9 years of Temasek's Annual Reports from 2006 to 2014. My analysis results below.

Based on the analysis, Temasek indeed realized SGD 1.9Bn from the investment in Shin Corp and this is a 61.8% gain over a 9 year period or a CAGR of 5.46%.

Conclusion to Investigation 1: The investment in Temasek did not end up in smoke. Although, the value of Shin Corp fell substantially immediately after the sale, Temasek patiently waited for 9 years before selling it's stake in Shin Corp. 

Although it was a substantial gain of 61.8%, the compounded annual growth rate of this investment was a slightly more modest 5.46%. 

In summary, SG Budget Babe was right in this aspect.

Her second investigation was:

2: Did Temasek really lose "billions through investments in banks like Citigroup and UBS" in 2008?

SG Budget Babe's (SGBB) analysis led to her conclusion that

i) GIC sold it's stake in Citigroup in 2009 for $1.6bn profit. 

ii) She wasn't sure if Temasek who bought Citigroup at it's peak has sold it's stake in Citigroup but she concluded that the share price had increased 70% in just 4 years.

I did some research and came to slightly different conclusions

i) GIC sold it's stake in Citigroup in 2009 for $1.6bn profit. That is correct and widely documented in news sources.

ii) Citigroup share prices did NOT increase 70% in just 4 years. 

Her conclusion that Citigroup shares went up 70% was false. She had failed to account for the 10-1 reverse stock split by Citi in 2011.

In layman term's, a reverse stock split is when a company reduces the number of shares it has.

For example, 

A company has 200 shares outstanding. Each share is worth 10 cents each. The total value of the company is 200 * 10 cents = $20.

If the company did a 10-1 reverse stock split, it would have 20 shares outstanding. However, the total value of the company is still the same at $20. This means that each share of the company will be worth $20 / 20 = $1.

Therefore for a true apples to apples comparison, Citi would be worth about $5 per share and not $50. This is a huge loss from the $29.50 she claimed Temasek bought Citi for in 2007.

However, she can heave a sigh of relief, because Temasek Holdings did not buy Citibank shares in 2007, she got the whole transaction confused with GIC's. (who thankfully made a $1.9bn gain. Phew!) 

Instead, Temasek had invested in Merrill Lynch shares, investing USD4.4bn at USD48 per share in 2007.

So therefore Temasek did not make a loss on Citibank shares. (Phew!)

In conclusion, Temasek's performance isn't as bad as it is made out to be but there were some discrepancies in SGBB's analysis. However this was a case where 2 wrongs happened to make a right.

L.A.M.

Which Town Council Was Managed the Most Wisely

On Beauty Parades and General Elections

Whether We Can Cut Military Spending by 5.75Bn.

On Whether AHPETC Overpaid it's Managing Agent?

Why do Opposition Parties need to sell stuff to raise money but the PAP doesn't?

The Day The Father of Accounting Rolled in His Grave

On the National Swing

Link to Excel File: 

Temasek's Shin Corp Investment Analysis:

Why do Opposition Parties need to sell stuff to raise money but the PAP doesn't

I first saw the above picture on the Fabrications About the PAP Facebook Page.

Instead of jumping on the bandwagon and attacking the Opposition for being money-grabbing scoundrels, I decided to do the responsible thing and try to do some research as to why unlike the Opposition Parties, the PAP does not need to raise money by selling fans, umbrellas, decals and flags at their rallies. Below is the reason why

PAP MPs have to contribute 10% of their monthly allowance to the party (Source). With 80 PAP MPs in Parliament with a monthly salary of 16,041.67 a month, this means that there is a contribution of at least $128,000 a month, $1.54m a year or $6.16m over the past 4 years.

However, out of the 80 MPs, there are various appointment holders who have additional allowances. There is

1 Prime Minister who earns $2.2m a year (Source)

18 Ministers who earns about $1.1m to $1.76m a year

5 Senior Ministers of State who earns $935,000 a year (Source)

6 Ministers of State who earns $770,000 a year (Source)

5 Mayors who earns $660,000 a year

1 Senior Parliament Secretary who earns $572,000 a year

1 Speaker of Parliament who earns $550,000 a year

2 Parliament Secretaries who earns $418,000 a year

1 Deputy Speaker of Parliament who earns additional  $82,500 a year

This means that cumulatively, there is a contribution of $23m by PAP MPs and Appointment holders over the past 4 years to Party funds and this is before bonuses.

Cost-wise, PAP faces the following costs for General Elections in 2015

89 election deposits of $14,500

Approximately $4 per election expense per voter (Source)

Approximately 2,460,977 electors in these 89 seats

Total cost: $11.1m which is less than half of the total MP contributions over the past 4 years

In contrast, the only other opposition party with MPs in Parliament is the WP. The WP have

7 MPs earning $192,500 a year

2 NCMPs earning $28,900 a year

Assuming that the party contribution for WP is 20%. Total party contribution over the past 4 years is merely $1.12m.

This is hardly enough to cover the costs of the elections for 28 seats which includes

28 election deposits of $14,500

Approximately $4 per election expense per voter (Source)

Approximately 375,500 electors in these 28 seats

The total cost of holding elections for WP is thus approximately $1.9m which is more than the party's contribution over the past 4 years. As such unlike the PAP, WP MP contributions alone are insufficient to pay for election expenses.

As such, the reason for why Opposition parties need to sell stuff to raise money for elections but not the PAP is very simple. PAP has greater contributions from MPs and Appointment Holders to its coffers (approximately $23m) while they are expected to spend about less than half this amount on election costs in 2015.

In contrast, the most well-funded opposition, the WP will find itself about 40% short of its costs even if it requires it's MPs to contribute a double the proportion of what PAP MPs contributes.

L.A.M.

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On SG Budget Babe's: The Truth About Temasek vs Chee Soon Juan's Claims

 

Did AHPETC inherit a deficit or a surplus from Punggol East SMC? If you are confused about it, read this:

The Day The Father of Accounting Rolled in His Grave

Note: After writing this post, I have noticed that it has been shared and read by many people and used to justify many different thoughts and opinions. Among the most ridiculous of which is that I am promoting communism. Lol.

I would like to categorically state that there is no need to infer my political leanings from what I write. As best as I can, I task myself with only two things, being politically informed and non-partisan. 

This article merely reflects one avenue of income for political parties. I am not advocating or condemning any party. The PAP, with it's long history as the dominant party in Parliament would have had the resources and time to create a formidable war chest and this is neither immoral nor illegal. 

However, we should not use this as a basis of comparison against opposition parties, who face different obstacles and have to resort to different kinds of funding methods. If there is anyone that I am condemning, it is irresponsible parties like FAP and TR who try to mislead the public with half truths and lies.

I hope that in this GE, all Singaporeans can try to be a little bit more mature in how we treat different parties. 

There should not be any bullying or misinformation or irresponsible sensationalisation. We as a nation are already half a century old. It's time to put these childish things behind us.

L.A.M.'s Statistical Dump of Fatal Air Crashes Since the 1980s

Today’s blogpost is inspired by a friend who asked, “John, what is the least safe airline”

I did some research and have compiled a list of Air Crashes¹ since the 1980s so that we can come to some form of conclusion

Ranking of Carriers by Fatal Incidents
Rank	Airline	Carrier’s HQ	#o f Fatal Accidents	# of Fatalities
1	Aeroflot	Russia	11	1157
2	American Airlines2	USA	9	639
3	China Airlines	Taiwan	6	640
4	Garuda Indonesia	Indonesia	6	310
5	Air France	France	5	484
6	Turkish Airlines	Turkey	5	194
7	Delta Air Lines	USA	5	231
8	Northwest Airlines	USA	4	189
9	Thai Airways	Thailand	4	243
10	Philippine Airlines	Philippines	4	76
11	Avianca	Columbia	4	503
12	Indian Airlines	India	4	349
13	Korean Air	South Korea	4	322
14	United Airlines	USA	3	145
15	Cubana de Aviación	Cuba	3	166
16	CAAC	China	3	144
17	Austral Lineas Aereas	Argentina	3	127
18	Saudi Arabia Airlines	Saudia Arabia	3	615
19	LOT Polish Airlines	Poland	3	271
20	Asiana Airlines	South Korea	3	83
21	Merpati Nusantara	Indonesia	3	72
22	China Eastern Airlines	China	3	59
23	Wideroe	Norway	3	57

 Based on number of fatal accidents, Aeroflot comes up tops with 11 fatal accidents, followed by American Airlines  (which includes subsidiaries such USAir and Air California). China Airlines, Garuda Airlines, Air France and Turkish Airlines rounds up the top 6.

Ranking of Carriers by Number of Fatalities
Rank	Airline	Carrier's HQ	#o f Fatal Accidents	# of Fatalities
1	Aeroflot	Russia	11	1157
2	China Airlines	Taiwan	6	640
3	American Airlines	USA	9	639
4	Saudi Arabia Airlines	Saudia Arabia	3	615
5	Japan Airlines	Japan	2	544
6	Avianca	Columbia	4	503
7	Air France	France	5	484
8	Indian Airlines	India	4	349
9	Korean Air	South Korea	4	322
10	Garuda Indonesia	Indonesia	6	310
11	TAM Airlines	Brazil	2	298
12	Air Africa	Congo	1	297
13	Kenya Airways	Kenya	2	283
14	Nigeria Airways	Nigeria	1	275
15	LOT Polish Airlines	Poland	3	271
16	Gulf Air	Bahrain	2	263
17	Arrow Air	Canada	1	256
18	ADC Airlines	Nigeria	2	249
19	Thai Airways	Thailand	4	243
20	Malaysia Airlines	Malaysia	1	239

Again Aeroflot is up tops with the most number of fatalities. China Airlines comes in second, leap frogging American Airlines due to the 1994 Airbus A300 crash while landing in Nagoya Japan which saw fatalities of 264 out of 271 passengers and crew members.³  American Airlines, Saudi Arabia Airlines and Japan Airlines rounds up the top 5.

Ranking of Carrier's Origin Country by Number of Fatal Incidents
Rank	Carrier's HQ	# of Airlines with Fatal Accidents	# of Fatal Accidents	# of Fatalities
1	USA	41	60	2576
2	Russia	19	30	2204
3	China	10	22	1620
4	Indonesia	5	13	744
5	Brazil	9	12	848
6	France	4	9	561
7	Congo	8	9	678
8	Nigeria	8	9	1088
9	Columbia	5	9	868
10	UK	8	9	308
11	Philippines	5	8	345
12	Spain	7	8	493
13	South Korea	2	7	405
14	Iran	6	7	529
15	Turkey	3	7	440
16	India	3	7	584
17	Thailand	3	6	334
18	Nepal	5	6	106
19	Pakistan	5	6	369
20	Argentina	3	5	214

 

Based on where the carrier is headquartered, USA has the highest number of fatal accidents. They also have a very high number of carriers with fatal accidents with a number of small and regional airlines in the mix. The rest of the top 5 are made up of 3 of the 4 BRIC countries and Indonesia which has had a low safety record among its carriers

Ranking of Carrier's Origin Country by Number of Fatalities
Rank	Carrier's HQ	# of Airline with Fatal Accidents	# of Fatal Accidents	# of Fatalities
1	USA	41	60	2576
2	Russia	19	30	2204
3	China	10	22	1620
4	Nigeria	8	9	1088
5	Columbia	5	9	868
6	Brazil	9	12	848
7	Indonesia	5	13	744
8	Congo	8	9	678
9	Saudia Arabia	1	3	615
10	India	3	7	584
11	France	4	9	561
12	Japan	1	2	544
13	Iran	6	7	529
14	Spain	7	8	493
15	Turkey	3	7	440
16	South Korea	2	7	405
17	Egypt	2	3	379
18	Pakistan	5	6	369
19	Philippines	5	8	345
20	Thailand	3	6	334

Based on where the carrier is headquartered, USA has the highest number of fatalities, followed by Russia, China, Nigeria and Columbia.

Ranking of Countries by Number of Fatal Accidents
Rank	Country of Crash	# of Fatal Accidents	# of Fatalities
1	USA	58	2597
2	Russia	27	1815
3	China	17	1144
4	Indonesia	13	843
5	Brazil	11	797
6	Congo	9	569
7	Spain	9	777
8	Philippines	8	345
9	Nepal	8	132
10	India	7	584
11	Nigeria	7	801
12	Thailand	7	619
13	France	6	410
14	Turkey	6	258
15	Columbia	6	481
16	UK	6	154
17	Canada	6	545
18	Venezuela	6	280
19	Japan	5	813
20	Pakistan	5	357

The above table lists the countries where the highest numbers of fatal accidents have occurred. Not surprisingly, countries where there are heavy air traffic such as USA, Russia, China, Indonesia and Brazil tops the list.

Ranking of Countries by Number of Fatalities
Rank	Country of Crash	# of Fatal Accidents	# of Fatalities
1	USA	58	2597
2	Russia	27	1815
3	China	17	1144
4	Indonesia	13	843
5	Japan	5	813
6	Nigeria	7	801
7	Brazil	11	797
8	Spain	9	777
9	Thailand	7	619
10	India	7	584
11	Saudi Arabia	2	576
12	Congo	9	569
13	Canada	6	545
14	Columbia	6	481
15	Iran	5	418
16	Taiwan	5	416
17	France	6	410
18	Kazakhstan	3	370
19	Pakistan	5	357
20	Indian Ocean	2	354

If you list the countries by number of fatalities, Japan enters the top 5 due to Japan Airlines Flight 123 in 1985, which was the deadliest single-aircraft accident in history with 520 fatalities on a flight with 524 people. ⁴

Ranking of Year by Number of Fatal Accidents
Rank	Year	# of Fatal Accidents	# of Fatalities
1	2011	20	479
2	2010	20	808
3	2009	16	721
4	1988	16	662
5	1996	15	1792
6	1982	15	845
7	1989	15	1108
8	2007	14	745
9	1993	13	565
10	1987	12	723
11	1999	12	441
12	1992	12	793
13	1980	12	1069
14	1983	12	719
15	1985	11	1548
16	2008	11	496
17	2002	11	631
18	1997	11	912
19	2013	10	195
20	1994	10	843

Since 1980, the worst year on record with the most number of fatal accidents is 2011, followed by 2010 in second place. This is in line with the trend where we see increased number of flights every year.

Ranking of Year by Number of Fatalities
Rank	Year	# of Fatal Accidents	# of Fatalities
1	1996	15	1792
2	1985	11	1548
3	1989	15	1108
4	1980	12	1069
5	1997	11	912
6	2000	10	873
7	1982	15	845
8	1994	10	843
9	1998	10	840
10	2010	20	808
11	1992	12	793
12	2006	9	787
13	2005	10	769
14	2007	14	745
15	1987	12	723
16	2009	16	721
17	1983	12	719
18	1991	9	681
19	1988	16	662
20	2002	11	631

 

However, if you were to compare by number of fatalities, the 2010s do not appear in the top 20 list. this shows that despite increasing air travel, our safety record appears to be improving.

In conclusion, air travel has become a lot of safer since the 1980s and we should quit worrying.

L.A.M.

PS: You can download the raw data from here.

¹ Excludes cases where airplane crash is due to hijacking, missile attacks and bombings. Also excludes crashes where there are no fatalities

² Includes acquired subsidiaries such as USAir and Air California

³ http://en.wikipedia.org/wiki/China_Airlines_Flight_140

⁴ http://en.wikipedia.org/wiki/Japan_Airlines_Flight_123

⁵ Data compiled from http://en.wikipedia.org/wiki/List_of_accidents_and_incidents_involving_commercial_aircraft

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