Gains on divestments multiplied 6 times over to RM9.9b last year from RM1.4b in 2018

by ALIFAH ZAINUDDIN / pic by MUHD AMIN NAHARUL

KHAZANAH Nasional Bhd booked a record profit of RM7.36 billion for 2019 after it moved to slash spending and made big gains on divestments as the fund moved to trim its stakes in non-strategic assets.

Gains on divestments multiplied six times over to RM9.9 billion in 2019 from RM1.4 billion in 2018.

The sovereign wealth fund has disposed of at least seven overseas investments since May 2018 including its shareholding in IHH Healthcare Bhd and Chinese e-commerce giant Alibaba Group Holding Ltd worth RM2.2 billion, the Parliament was told in November last year.

Others included entire stake sales in BDO Unibank Inc worth RM1.56 billion, Farfetch.com Ltd (RM771 million), SEA Ltd (RM612 million), Infosys Ltd (RM201 million) and PT Charoen Pokphand Indonesia Tbk (RM196 million), as well as a partial stake sale in Titan Industries Ltd (RM89 million).

Khazanah MD Datuk Shahril Ridza Ridzuan (picture) said the sovereign wealth fund’s performance in 2019 was achieved against a backdrop of uncertainties in the global landscape, which saw a prolonged Brexit process and heightened tensions between the US and China.

“This was made more challenging by the continued low returns environment and generally slower economic growth. Despite these challenges, we managed to achieve significant progress in delivering on our mandate to grow Malaysia’s long-term wealth,” he said in a statement yesterday.

The state-owned fund declared a dividend of RM1 billion for 2019.

The year also saw Khazanah reduce its debt by 17% to RM45.8 billion as at Dec 31, 2019, from RM55.2 billion as at end-2018, while expenses were cut down by 28.2% to RM484 million from RM674 million in 2018.

Khazanah recently relocated its headquarters from Petronas Twin Towers to Mercu UEM in KL Sentral to minimise costs, with the move expected to shave operational costs by RM3 million annually. The fund owns the 29-floor Mercu UEM building via its wholly owned subsidiary UEM Group Bhd.

The move comes after Shahril confirmed reports the fund would close its 10-staff office at The Shard in London due to high costs. Rental rates at the city’s tallest skyscraper are as high as £90 (RM579) per sq ft per year, according to the Financial Times in August 2015.

Khazanah was given a refreshed mandate last year to revamp its investment playbook by classifying its portfolios into two distinct categories — commercial and strategic funds.

Its investment in companies such as CIMB Group Holdings Bhd and Axiata Group Bhd would be part of the commercial fund, while companies such as Tenaga Nasional Bhd, Malaysia Airlines Bhd (MAB), Malaysia Airports Holdings Bhd and Telekom Malaysia Bhd are part of its strategic fund.

The commercial fund’s net asset value stood at RM73.1 billion at end-2019. It generated a time-weighted rate of return of 8.3%, surpassing the long-term targeted rate of return equivalent to Malaysia’s Consumer Price Index plus 3% on a five-year rolling basis.

Khazanah’s strategic fund also achieved financial and strategic outcomes for specific assets despite the sluggish market last year.

It generated an overall return of 2.9%, versus its targeted rate of return of the 10-year Malaysian Government Securities’ yield on a five-year rolling basis.

In 2018, Khazanah recorded its first loss in 13 years due to RM7.3 billion worth of impairments — more than half of which was contributed by its wholly owned loss-making national carrier MAB.

The state-owned fund said it has shortlisted potential partners to resolve key issues facing MAB and will continue to work closely with the government and the airline to further review the proposals and finalise a decision on the appropriate strategic option moving forward.

Looking ahead, Shahril said: “This year will be particularly challenging as an already uncertain global economy is harmed by the ongoing Covid-19 spread. While our government’s stimulus package is a welcome response, we nevertheless are preparing for a period of global economic slowdown.

“The current uncertainties will affect countries and companies alike. Nevertheless, we are comfortable that our diversified portfolio and strategies are robust while accepting that it will be extremely difficult to achieve the same levels of success as 2019.”