Khazanah on track for long-term sustainability

Although the lockdown would have some effect on Malaysia’s recovery, Khazanah Nasional Bhd chairman Tan Sri Muhyiddin Yassin said in the Khazanah Report 2020 that Malaysia was positioned to reap benefits from stronger global economic and trade activities.

KUALA LUMPUR: Khazanah Nasional Bhd expects a challenging year ahead as full recovery among key sectors such as aviation and tourism would not possibly happen in the next three years.

Although the lockdown would have some effect on Malaysia’s recovery, Khazanah Nasional Bhd chairman Tan Sri Muhyiddin Yassin said in the Khazanah Report 2020 that Malaysia was positioned to reap benefits from stronger global economic and trade activities.

“The trajectory of our economic growth will benefit from better global demand, increased public and private sector expenditure, as well as continued policy support, while the ongoing rollout and expansion of our nationwide vaccination programme will also be a contributing factor, ” he added.

However, Muhyiddin noted that the country’s recovery was dependent on its ability to interrupt the chain of transmission of the Covid-19 pandemic and achieve herd immunity.

With more than 10% of the country’s population having received at least one dose of the vaccine, he said there was optimism, as the Covid-19 national immunisation plan had moved into high gear with the government’s vaccination target to be achieved by the end of the year.

“While there are signs of recovery in 2021, we cannot let our guard down. The economy, at both the global and domestic levels, will take time to fully bounce back, and until vaccines have been extensively administered, not just in Malaysia but across the world, the pandemic will continue to have a grip on our lives, ” Muhyiddin pointed out.

Nonetheless, he is confident in Khazanah’s ability to ensure long-term business sustainability and continuing to manage risks and upholding good governance.

Given that the sovereign wealth fund posted a steady overall performance last year, Muhyiddin believes that it gives the group confidence in its capability to ride the storm and invest for the country’s future, while delivering sustainable value for all Malaysians.

“Being resilient and persevering in the face of challenges gives us strength and hope, and this is how we, as a nation and as a people, will forge ahead. Undoubtedly, it is during the worst of times that we often see the best of humanity, ” Muhyiddin explained.

As it was a challenging year last year caused by the Covid-19 pandemic, Khazanah Nasional posted a lower profit from operations of RM2.9bil in 2020 compared to RM7.4bil in 2019 due to lower investment gains of RM2.7bil from RM9.9bil in 2019.

The group declared a dividend of RM2bil last year.

According to the Khazanah Report 2020, it gained a higher dividend income of RM5.2bil, lower divestment gains of RM2.7bil, and made higher impairments of RM6bil in comparison to the previous year which were mainly due to the impact of the pandemic on aviation and tourism.

Moving forward, Khazanah managing director Datuk Shahril Ridza Ridzuan said the group would focus on five strategic priorities that have been identified in the coming years.

“We aim to further enhance our commercial returns, deliver impactful value through our strategic investments, embed environmental, social and governance considerations across our investment activities, build a strong digital and technology foundation, and continue to invest in our people, ” he explained.

Besides that, the group plans to continue diversifying its commercial fund (CF) portfolio towards achieving the long-term strategic asset allocation.

In the past two years, Khazanah has continued to rebalance its CF portfolio, to diversify the portfolio and improve risk-adjusted returns.

Last year, the CF generated a time-weighted rate of return of 1.5% with a realisable asset value (RAV) of RM95.3bil.

On the other hand, the group noted that its strategic fund (SF) portfolio, posted an overall gain of 0.3%, while its RAV fell 15% to RM27.9bil in 2020 from RM32.9bil in 2019.

“The portfolio value was heavily impacted by the fall in market value of key listed assets and impairments made on aviation and hospitality assets, namely, RM3.1bil for Malaysia Aviation Group Bhd (MAG) and RM1.8bil for Themed Attractions Resorts & Hotels to account for these effects.

“As the sole shareholder of MAG, Khazanah continues to provide full support and close cooperation in the comprehensive efforts to ensure the national carrier’s sustainability post-pandemic, ” it said.

As part of MAG’s internal restructuring, Khazanah said MAG would focus on working closely with the government and stakeholders on restarting air travel, promoting industry recovery as well as continuing cash conservation while capturing demand recovery.

“Overall, Khazanah has set long-term five- year rolling targets for CF and SF, and as a long-term investor, we will continue to execute our investment strategy towards achieving and hopefully exceeding our targets.

“We will review the strategic investment themes on a regular basis based on global economic megatrends and national needs, ” it added.

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