ONE of the well-known overseas investments Khazanah Nasional Bhd has made in the last few years is the US$250mil buy into Jack Ma’s e-commerce business Alibaba Group.
Thanks to Alibaba’s performance and valuations, Khazanah has been able to make some pretty pennies from its divestments in the stock since its US initial public offering in September 2014.
Although its initial investment in the stock was small compared with the size of Alibaba’s valuation, which back then was estimated at between US$160bil and US$170bil, the sovereign wealth fund has the foresight to invest in the Chinese online retail giant.
In 2014, Khazanah recorded gains to the tune of RM3.9bil from divesting some of its shares in Alibaba, quite a significant jump considering its cost was only about RM1.3bil. It now has a 0.2% stake in the company.
Khazanah is on the lookout for more opportunities to expand its overseas presence.
It has no intention of expanding any more in terms of offices around the world, as it is already in five of the most influential regions of the world, including the United States and China, which will keep Khazanah busy.
Khazanah’s international investments have given it higher returns compared with its overall portfolio. At the recent Khazanah annual review, managing director Tan Sri Azman Mokhtar said the international investments gave the fund about 18% per annum, compared with a 10.7% overall return.
He addressed the need for the fund to diversify for this reason, as well as to build its presence and linkages.
The kind of investments the sovereign wealth fund is on the lookout for are ones that could potentially disrupt the market, and by disrupt, it means having the potential to either make an existing company obsolete or bring about changes in the way “traditional” businesses are run.
“Currently innovation and technology is only 2.3%, which is relatively small. We think it should be more. The key point is yes, it’ll be risky but at the same time it is risky not to get involved,” he said.
One such company Khazanah has taken an interest in is US-based private equity firm General Atlantic LLC, which was an early investor in social media app Facebook Inc, as well as private car service Uber Technologies Inc.
General Atlantic has some US$20bil in assets and has been investing heavily in the Internet and technology industry for the past two decades.
0It recently went into media company BuzzFeed Inc as well as home-rental service Airbnb Inc, which is changing the hotel and accommodation scene.
Airbnb completed a US$1.5bil private funding deal last June, leading to the company being valued at US$25.5bil.
General Atlantic is among four companies that collectively bought a third of the shares allocated for the private funding round.
Khazanah’s evaluation process on potential investments is quite long and tedious, and is set up that way to minimise room for error. However, its prolonged investment evaluation process has also caused it to miss out on opportunities, such as GrabTaxi or MyTeksi.
Today, there are more than 170,000 drivers registered on GrabTaxi’s mobile platforms in Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines.
Such a missed opportunity begs the question if Khazanah’s evaluation process needs to be as lengthy as it is now, and why. This is because Singapore’s Temasek, which has its own stringent and in-depth evaluation process, was able to complete its evaluation and make a quick decision on GrabTaxi. Temasek’s initial investment in GrabTaxi is said to have come up to eight figures.
Perhaps this is an area Khazanah should look into – shortening its evaluation processes so it is able to take advantage of investment opportunities and ideas quickly.
Another of its investments is in India’s Zivame, a lingerie retailer attracting women all over India to shop online.
Typically, lingerie in India is sold by men and is afflicted by poor availability in styles and inventory.
Zivame is seen as an answer to avoid the awkwardness that comes with buying lingerie from salesmen, as opposed to saleswomen.
An investment it is thankful to have not been left out on is the Philippines-based low-cost mass housing developer 8990 Holdings Inc.
This company as an investment, is in line with one of Khazanah’s vision to invest in companies that are making a positive difference in people’s daily lives.
8990 aims to provide decent shelter along with an in-house financing scheme to Filipinos, many of whom have no bank accounts.
Going back to the founding days of 8990, founder Luis Yu Jr, a simple man at the registrar of companies in Philippines was undecided about name his company. He glances down and looks at his Nokia 8990 phone, then proceeds to write those numbers down under “company name”.
In May 2014, Khazanah, together with global private investment firm TPG, agreed to buy US$132mil worth of shares in 8990.
Investing in Skyscanner
The fund also recently announced it was among five new partners who would invest US$192mil (RM824.35mil) in Edinburgh-based Skyscanner, a tech-based travel service. The company, which was founded in 2003, provides free search of flights, hotels and cars for hire from around the world.
Khazanah also aims to make investments with a heart, through its sister entity Yayasan Hasanah, which has been endowed with RM3bil to fund its community work. The foundation strives to create real and lasting positive social and environmental changes in five key areas – education, community development, environment, arts, heritage and culture, and knowledge.
Last September, the Government announced that it would be spending RM1.1bil to upgrade and refurbish national attractions such as the National Museum and Royal Lake Park, which includes connecting them to KL Sentral, which Khazanah will undertake.
It has some big names in the architecture and designer space that will assist in planning for the National Museum, including those that worked with the Louvre Pyramid in Paris.
Khazanah has also been tasked with the Desaru Coast Destination Resort integrated development.
The first phase of development will cost RM4.5bil. The entire development comprises hotels, a water theme park, a convention centre and shopping villages.
Under the education area, Khazanah rolled out the first tranche of RM100mil of its RM1bil sustainable and responsible investment sukuk last year, the first of its kind.
The proceeds of the issuance was channeled to Yayasan AMIR, a non-profit organisation initiated by Khazanah in 2010 to manage its cashflow for the deployment of the Trust Schools Programme for schools identified in 2015.
The first issuance will be used fund 20 new government schools under the programme in Kuala Lumpur, Johor and Sarawak.