Leadership changes at Khazanah could pave way for greater growth

The move provides the opportunity to look into new strategies and to allow new faces to refresh the group


The possible changes in leadership at Khazanah Nasional Bhd are likely to be positive in the longer term, with potential for value creation and new strategies to come into play, although investor reaction to the changes remains mixed so far.

Khazanah announced yesterday that all nine of its board members, including MD Tan Sri Azman Mokhtar, have offered to resign from the board in order to facilitate a smooth and orderly transition under the new government.

Khazanah also said a further statement would be issued once it has obtained further details of the reconstitution of the board.

Areca Capital Sdn Bhd CEO and ED Danny Wong Teck Meng told The Malaysian Reserve (TMR) that the leadership changes are positive in the long run as they provide the opportunity to look into new strategies and to allow new faces to refresh the group.

“The market has largely priced in expectations for the resignation offers, as some of the board members have been there for a while now. There is temporary uncertainty, but once the dust settles, there will be some clarity going forward, so the negative response to some Khazanah-linked counters is likely short-term,” he said.

Khazanah’s publicly listed investee companies on the local bourse include Malaysia Airports Holdings Bhd (MAHB), Telekom Malaysia Bhd (TM), Axiata Group Bhd, CIMB Group Holdings Bhd, Tenaga Nasional Bhd (TNB), IHH Healthcare Bhd, Astro Malaysia Holdings Bhd, TIME dotCom Bhd, UEM Sunrise Bhd and UEM Edgenta Bhd.

Investors’ reactions were mixed to these firms at Bursa Malaysia yesterday, with TNB, TIME and IHH posting increases in their share prices, while the rest registered declines. Wong noted that while

Wong noted that while selected stocks like Axiata, TNB and CIMB fell, they were not limit down, “so there are some jitters, but it’s not an entirely negative response”.

Changes in the board could also see Khazanah unlocking more values within its controlled companies, Wong added, pointing to the example of Permodalan Nasional Bhd (PNB), also a government-linked investment company.

2017 saw the completion of several major demergers at PNB investee companies, namely UMW Holdings Bhd and UMW Oil and Gas Corp Bhd, Chemical Co of Malaysia Bhd (CCM) and CCM Duopharma Biotech Bhd, and the Sime Darby group which resulted in the separate listings of Sime Darby Bhd, Sime Darby Plantation Bhd and Sime Darby Property Bhd.

Whether the changes at Khazanah’s board could result in further shifts at its investee companies’ management levels remains to be seen.

“It’s inevitable that under a new government, there will be new people in charge, and that could cascade down to the investee companies. But the change (at Khazanah) is positive because there’s a chance to improve things — as a sovereign fund, it plays a very important role in paying dividends to the government,” Wong noted.

Khazanah’s portfolio as at end-2017 stood at RM116 billion in terms of adjusted net worth — market value of all equities, securities and cash held, after deducting debt and other liabilities.

In addition to holding controlling stakes in Axiata, CIMB, IHH, TNB and TM, it also wholly owns UEM Group Bhd and Malaysia Airlines Bhd, and has a 51% share in PLUS Malaysia Bhd.

At market close yesterday, Axiata slid 17 sen, or 3.83%, to RM4.27, MAHB fell seven sen, or 0.77%, to RM9.03, TM was down two sen, or 0.52%, at RM3.85, CIMB slipped one sen, or 0.17%, to RM5.88, UEM Sunrise declined 2.5 sen, or 2.7%, to 90 sen, and UEM Edgenta lost five sen, or 2.28%, to settle at RM2.14.

Meanwhile, TNB rose 22 sen, or 1.48%, to RM15.10, TIME climbed nine sen, or 1.12%, to RM8.14, and IHH added three sen, or 0.5%, to RM6. Astro was unchanged at RM1.81.