Lower ASB dividend on the horizon

Experts are of the opinion that PNB would have seen its investments affected by the global economic downturn


PERMODALAN Nasional Bhd (PNB) is expected to announce a slightly lower income distribution for its flagship fund, Amanah Saham Bumiputera (ASB), for the financial year ending Dec 31, 2020 (FY20), or merely at par with the 5.50 sen per unit disbursed in FY19, as investments continue to be distressed by the Covid-19 pandemic.

Experts are of the opinion that PNB, via its wholly owned unit trust company, Amanah Saham Nasional Bhd (ASNB), would have seen its investment both locally and overseas affected by the global economic downturn.

Nevertheless, while ASNB’s income may seem generally squeezed, its international portfolios might still bring higher returns.

“It can be expected that income distribution may be slightly lower this year, but PNB, like any other government-linked investment companies, would try to even out returns to members. So, they may make some special provisions to keep up payments.

“Of course, the Covid-19 impact is the main factor affecting both local and foreign investments,” Williams Business Consultancy Sdn Bhd founder and director Dr Geoffrey Williams told The Malaysian Reserve (TMR).

The silver lining could be seen via market recovery since March, both for Bursa Malaysia and international stock indices, particularly in the US following the presidential election. Williams said PNB’s financial performance would hinge on its portfolio management to tap into pockets of opportunities amid a challenging environment.

“Depending on how the PNB managers have been able to respond, there have been some good investment opportunities this year. Medical stocks, for example, have done well locally,” he said.

As of yesterday, the FTSE Bursa Malaysia KLCI (FBM KLCI) has a year-to-date (YTD) return of 0.63%.

The benchmark index was down 0.24% over the period with a net change of -3.78 points.

Apart from the pandemic, the local market has also been hit by political uncertainties that have been going on since the early part of the year.

Williams said PNB’s diversification into a greater overseas portfolio would help the fund offset the domestic impact.

He said international equity markets are volatile, but have recovered through the crisis.

The S&P 500 Index has added almost 1,500 points since March and is up 16% YTD.

An analyst said PNB would also be slightly affected following banks’ declaration of lower dividends this year.

Many financial institutions have yet to offer a full-year dividend for FY20 as well.

The analyst said the rise in developed markets would offset the lower performance seen in emerging markets (EMs).

“In totality, PNB might be getting some good shares from the US, for example, but it will be offset by the Malaysian markets.

“Considering the healthcare sector that comprises about 10% of FBM KLCI, that segment has been outperforming, but the remaining 90% is still not performing,” the analyst told TMR.

On the real estate front, the analyst said the segment did see a decline at one point, but has seen quite a strong recovery in the second half of the year.

Putra Business School associate Prof Dr Ahmed Razman Abdul Latiff also said that a lower ASB dividend is only expected, if not at a similar level compared to FY19, as a result of the economic downturn and sluggish local stock market.

Similarly, he said PNB’s overseas investments would provide some respite from the impacts.

“For the past few years, PNB has been making good returns on its overseas investments and most likely, overseas investment for this year will help offset some of its local losses,” Ahmed Razman told TMR.

Last year, PNB’s international public equity generated the highest returns, contributing more than 11.6% to an overall gross income of RM15.1 billion, despite a small exposure of 5.9%.

Its global exposure increased from 1.8% or RM4.7 billion in FY16 to 8.5% or RM26.4 billion in FY19.

The country’s largest investment management company is set to expand its overseas investments to 30% by 2022 from the current 8.5%, as the fund embarks on a three-year plan to diversify its portfolio into real estate funds and private equities in EMs.

For FY19, ASNB announced a distribution payout of 5.5 sen per unit for ASB — the lowest since 1990 — comprising an income distribution of five sen per unit and a bonus of 0.5 sen per unit.

The total payout for the income distribution amounted to RM9 billion, benefitting 10 million unit holders with 167.2 billion units held.

ASNB also declared an income distribution of 2.75 sen per unit for ASN fund for FY19. That reflected a dividend yield of 4.4% based on the net asset value of the fund as at Dec 16, 2019.

The total payout of RM49 million benefitted over 1.22 million unit holders with more than 1.78 billion units held.

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