MAB not likely to dent Khazanah’s performance

by NUR HANANI AZMAN / pic by MUHD AMIN NAHARUL

MALAYSIA Airlines Bhd (MAB) performance will not dent Khazanah Nasional Bhd’s financial standing for the year, according to an expert.

The sovereign wealth fund made RM3 billion worth of impairment for MAB in 2020 following the ailing company’s poor performance, made worse by the impact of the pandemic.

In total, the impact of the Covid-19 pandemic has led to higher losses of RM6 billion in 2020 for Khazanah, particularly in aviation and hospitality assets, compared to RM4.9 billion impairment made in 2019.

MAB has been struggling to transform its operations and return to profitability even before the pandemic starts.

Endau Analytics founder Shukor Yusof said the effect of MAB towards Khazanah’s performance is likely to be negligible.

“Khazanah would have factored in MAB’s losses for the fiscal year. It won’t dent Khazanah’s bottomline, that’s for sure.

“Aviation definitely had a slight recovery and improvement in 2021 compared to 2020, following the opening of domestic tourism with the standard operating procedures,” he told The Malaysian Reserve (TMR).

Khazanah reportedly made more money from global markets than it did from Malaysia, where some of its key holdings in airlines as well as tourism and hospitality were severely hit by Covid-19.

The fund currently invests in two separate investment funds — the Commercial Fund and the Strategic Fund — where the former focuses on investing responsibly and commercially to preserve and grow the long-term value of its assets while the latter undertakes investments to deliver impactful measurable economic and societal returns for the nation and its people.

Another expert said Khazanah is expected to have a better financial performance in 2021 and pay a higher dividend to the government than RM2 billion in 2020.

Putra Business School Assoc Prof Dr Ahmed Razman Abdul Latiff said in 2020, Khazanah’s overall performance was affected not mainly due to the impairment of MAB but also due to falling revenue and slightly higher operating expenses, where Khazanah contributes RM20 million for the Covid-19 relief to the government.

“Even though the total assets have been reduced slightly, the overall debt has also been reduced, which indicates better efficiency in managing liquidity. With the economy experiencing recovery growth especially in 2021, I foresee that MAB’s performance will gradually improve as the people are allowed to travel again.

“However, the threat of the Omicron variant cannot be discounted and the vaccine booster campaign hopefully will mitigate such a threat,” he said to TMR.

He said in 2020, Khazanah also made an impairment of RM1.8 billion for Themed Attraction Resorts and Hotel (TARH) which include Kidzania and Legoland.

“With continuous government support to promote tourism and the hospitality industry, this year should see an improved business performance of TARH,” he added.

Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid believe the equities market, be it globally or domestically, are expected to do better this year.

He said this on the back of improving economic recovery as the vaccination drive has helped to ensure that the risk of infection can be mitigated.

“This would mean the reopening of the economy would occur in a more sustainable manner which also indicates that businesses are able to operate more normally. However, the downside risks are still visible and it will still be revolving around Covid-19 along with rising inflationary risks.

“Also, concerns over rising interest rates globally could also result in intermittent volatility markets. Against such a backdrop, the market prospect looks promising which would present an opportunity for institutional investors to invest,” he told TMR.