KHAZANAH Nasional Bhd has managed to stage a turnaround by posting a profit from operations of RM7.36 bil for 2019 on the back of higher divestment gains of RM9.9 bil compared to a loss of RM6.27 bil the previous year.
The sovereign wealth fund in a March 2 statement also declared a lower dividend of RM1 bil for 2019 compared with RM1.5 bil in 2018. Lower impairments were also registered at RM4.9 bil last year from RM7.3 bil the previous year.
“Khazanah achieved solid progress across multiple areas, including generating returns in line with long-term targets for its commercial fund, delivering financial and strategic outcomes for assets in its strategic fund, and strengthening its financial position through operating expenditure (opex) reduction and debt repayment,” the fund said.
Khazanah added that it strengthened its financial position with expenses reduced by 28.2% to RM484 mil from RM674 mil in 2018. “This equates to 35 basis points (bps) as a percentage of assets, compared to 50bps the previous year,” the fund said.
Debt was reduced by 17% to RM45.8 bil from RM55.2 bil in 2018, while realisable asset value cover (or realisable value over total debt) improved to three times from 2.4 times, Khazanah said.
The fund’s investments are grouped into two baskets, commercial and strategic. Commercial assets include CIMB Group Holdings Bhd, Axiata Group Bhd, IHH Healthcare Bhd and China’s Alibaba Group Holding Ltd. Strategic assets include Tenaga Nasional Bhd, Malaysia Airlines Bhd, Malaysia Airports Holdings Bhd, Telekom Malaysia Bhd and PLUS Malaysia Bhd.
According to Khazanah, the commercial fund, which is an inter-generational wealth fund, generated a time-weighted rate of return of 8.3%, surpassing the long-term targeted rate of return equivalent to the Malaysian consumer price index (CPI) +3% on a five-year rolling basis. The commercial fund’s net asset value (NAV) stood at RM73.1 bil as at Dec 31, 2019.
Khazanah said it would further diversify its commercial fund while working with the government to enhance relevant regulatory frameworks.
As for strategic funds, Khazanah said it generated an overall return of 2.9%, versus its targeted rate of return of the 10-year Malaysian government securities (MGS) yield on a five-year rolling basis. The 10-year MGS yield was 3.3% as of Dec 31, 2019.
Moving forward, Khazanah managing director Datuk Shahril Ridza Ridzuan said this year would be “particularly challenging” for the fund, citing economic uncertainty due to the Covid-19 outbreak. “While our government’s stimulus package is a welcome response, we nevertheless are preparing for a period of global economic slowdown,” he said in a statement.
“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.” – March 2, 2020
