Malaysia’s Khazanah says divestments part of ordinary course of business

The Khazanah Nasional Berhad logo is displayed on a laptop. Photo: Ipsita Ray/DEALSTREETASIA

Malaysia’s sovereign wealth fund Khazanah Nasional Bhd has said that an ongoing asset divestment exercise is part of its ordinary course of business of realising investments and redeploying capital into new investments.

Refuting allegations that Khazanah was selling off national assets and accumulating debt, the wealth fund’s managing director Shahril Ridza Ridzuan told news agency Bernama that its core focus was to deliver its strategic priorities in the near term. The decision to sell or hold assets were based on purely commercial reasons, he said.

“All opportunities for divestment are assessed on a case-by-case basis against our financial and strategic targets and will depend on the timing and strength of the market and also the availability, quality, and credibility of buyers,” Shahril told Bernama.

The divestment proceeds are mainly utilised by the firm to pay off maturing debt and to fund new investments. The firm has managed to pare down its debt from 55 billion ringgit to 47 billion ringgit within a year through asset and investment sales.

So far this year, Khazanah’s asset sales have yielded around 15.9 billion ringgit ($3.78 billion) mostly from the partial reduction of its stake in IHH Healthcare Bhd (8 billion ringgit), Alibaba Holdings (2 billion ringgit) and Tenaga Nasional Bhd (1 billion ringgit). Furthermore, Khazanah also raised 1.5 billion ringgit from full divestment of its holdings in the Philippines’ BDO Unibank and 771 million ringgit from UK’s Farfetch.com Ltd.

Meanwhile, the wealth fund is targeting a pre-tax profit this year of at least 5 billion ringgit ($1.2 billion), which would be its highest in eight years, after posting its first loss in a decade in 2018, Reuters reported. “For this year, we hope to achieve profitability of at least 5 billion ringgit,” Shahril told reporters at the fund’s annual conference.

Over the last 10 years, Khazanah has divested more than 100 assets worth around 65 billion ringgit.

Earlier this year, the $39-billion sovereign wealth fund also unveiled a refreshed mandate classifying its assets into separate commercial and strategic funds.

The commercial fund is an intergenerational wealth fund to meet Khazanah’s commercial objective. It includes public assets such as CIMB Group, Axiata Group, IHH Healthcare and Alibaba.com; and private assets such as The Holstein Milk Company, Sun Life Malaysia, WeLab and Palantir.

The strategic fund targets a return of 10-year Malaysian Government Securities yield on a five-year rolling basis and measurable economic benefits. This fund includes strategic assets such as Telekom Malaysia, Tenaga Nasional, Malaysia Airlines, Malaysia Airports, and PLUS Malaysia; and developmental assets such as Silterra, Iskandar Investment Berhad, Themed Attractions Resort & Hotels, Pinewood Iskandar Malaysia Studios and Medini Iskandar Malaysia.