Temasek Holding’s $552.5 million failed investment in ABC Learning Limited which nobody knew.

I did a fact check, SPH and Mediacorp did not report Temasek’s $552.5 million failed investment in A.B.C. Learning Limited, which was listed in ASX and liquidated by November 2008. Singaporeans never knew how big the news was in Australia back in 2008. I understand that this was only one of the many failed investments Temasek and GIC made overseas. Nobody knew how much was lost. Not until recently, nobody knew that most of our hard earned CPF retirement monies are utilized by these companies to make ultra-risky investments. If Singaporeans had known about this prior to the 2011 general elections, would the PAP have garnered 60% of the votes? I don’t think so. Don’t forget, the directors of Temasek and GIC are currently our elected ministers and their PAP cronies. How much better Singaporean’s life would be if the $552.5 million was invested in our childcare services industry.

How much of a fool Temasek was when they invested in ABC learning? By the way, it makes Singaporeans even more of a fool by Temasek when you realize the sheer stupidity involved in this investment. The following is a series of videos by CPA Australia telling us how ABC learning collapsed. The presenter mentioned our dear Temasek Holdings at 3:18min: https://www.youtube.com/watch?v=YYF6JW9vJKo&index=1&list=PL12C0ADD577F6B741

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Prior to the collapse of ABC Learning, there were already significant financial indicators seriously impacting its going concern status in 2007 (News limited 2008). In 2007, its current liabilities amount to 1.1 billion, expected to be repaid within one year. Its aggressive acquisitions overseas were funded by debt and share issuance, which seriously affected its liquidity and financial position. The current ratio in 2007 was 26.9%, down from 180% in 2006. Its debt-to-equity ratio skyrocketed from 25% to 114% in 2007 (A.B.C Learning 2006; A.B.C Learning 2007). This meant that it had to generate massive profits quickly to stay in business. Its collapse can be largely attributed the high price paid for its acquisitions, the huge amount of debt it took on and could not withstand the global financial crisis as the price of debt rose sharply throughout 2007, forcing it to sell off 60% of its portfolio in April 2008 on the cheap. Hence, that seriously impeded its profitability, for which they failed to generate sufficient funds to meet its financial commitments (CPA Australia Limited 2014).

Despite that, Temasek bought 55 million new shares valued at AUD$401.5 million in May 2007. It controlled 12 per cent of ABC Learning. It even increased its stake just as the child care operator’s shares were plunging 42% while the founders and directors of ABC Learning dumped millions of shares. Founder Edmund/Eddy Groves and his wife sold virtually all of their stakes of 20 million and 6 million shares respectively while director Martin Kemp unloaded 2.7 million shares. The combined Groves’ stake represented 8 per cent of the company (Korporaal & Meade 2008). Behold, for unknown reasons, Temasek bought another 8 million shares at the price of $2.14 each in early 2008 as shown in panel B of figure 1 below (News limited 2008). That was right before ABC learning sold off 60% of its assets. The overall ownership increased to 15% and its total investment amounted to the SGD equivalent of $552.5 million.

1

Figure 1: Stock Prices of ABC Learning Centres Limited (Intelligent Investor)

Trading in ABC Learning shares was suspended in August 2008 after the company failed to release its earnings for the 2007-08 financial year. By November 2008, it went into receivership subsequently wind up completely by June 2010.

I am pondering very hard. Did Temasek do its homework diligently before investing in a Childcare centre? The warning signs were very obvious. Directors who knew a lot of inside information were dumping all their shares, thus removing their ownership and ‘responsibilities’ in the company.

Besides, how much potential can you expect from a childcare service provider? We didn’t have enough childcare centres and services in Singapore at that time. How much better it would be if that $552.5 million was spent on improving Singapore’s low birth rate and related childcare services industry. Was Temasek aware of the ABC learning’s inability to fulfil its massive debt obligations impacting its going concern status or was it hoodwinked by material misstatements which promulgated a bed of roses? In my opinion, Temasek was too greedy for a “bargain.” They don’t care one bit how risky that investment was and also not one bit of remorse for the massive losses incurred. By the way, its not their money.

Singaporean’s CPF are invested in unrated SGSs bonds where Temasek and GIC utilize them for investments. They are only obligated to pay you 2.5% interest, not returns from the investments. They bear zero responsibility for any principal losses. There is a saying, “If I win, I take the earnings, if I lose, that’s your problem.” Singaporeans, say good bye to your $552.5 million and more.

Bibliography

A.B.C. Learning 2006, A.B.C. Learning Centres Limited: Annual Report 2006, A.B.C. Learning Centres Limited.

A.B.C. Learning 2007, A.B.C. Learning Centres Limited: Annual Report 2007, A.B.C. Learning Centres Limited.

ABC News 2012, Auditor suspended over ABC Learning report. Available from: <http://www.abc.net.au/news/2012-08-08/auditor-suspended-over-abc-learning-report/4185408&gt;

CPA Australia Limited 2014, ABC Learning collapse case study. Available from: < http://www.cpaaustralia.com.au/professional-resources/education/abc-learning-collapse-case-study&gt; and < https://www.youtube.com/watch?v=a4rcGpRXD9I&list=PL12C0ADD577F6B741&index=6&gt;

Intelligent Investor 2015, A.b.c. Learning Centres Limited: Overview. Available from: < https://www.intelligentinvestor.com.au/shares/company-overview/14639&gt;

Korporaal G. and Meade K. 2008 “ABC Learning’s Eddy stripped of stake” The Australian. Retrieved 2008-03-09.

News Limited 2008, Finance: Sinagpore’s Temasek lifts its stake in ABC Learning. Available from: <http://www.news.com.au/finance/singapore-circles-abc-learning/story-e6frfm1i-1111115669634&gt;

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2 comments

  1. Xmen · January 21, 2015

    Speaking of high water mark, check out Temasek’s recent investment in Intelligent Energy Holdings plc. It invested US$63 in March 2014 and then exercised options to purchase more shares at the IPO. The shares was trading at about half the IPO price in a span of 6 months since IPO. Of course, Temasek is always investing for the long term and we need not worry about short term performance. LOL.

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  2. Pingback: Its Better To Find A Second Home Outside Singapore | Embracing Your Identity

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