Published July 2, 2009

Khazanah revels in rising portfolio as stocks recover

Bumper H1 for KL's investment arm and it even turned in a profit last year

By S JAYASANKARAN
IN KUALA LUMPUR

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REFLECTING the rise in global equity markets, Kuala Lumpur's investment arm Khazanah Nasional's portfolio rose by 34 per cent to RM44 billion (S$18 billion) in the first half of 2009.

This was disclosed yesterday by Khazanah head Azman Mokhtar who said that the total realisable asset value of the agency's portfolio rose to RM85 billion from RM69.5 billion six months ago.

Mr Azman, 48, was speaking to investors at the Invest Malaysia 2009 conference and reiterated that the call made by Prime Minister Najib Razak on Tuesday - that government linked companies dispose of non-core assets - would be adhered to by Khazanah.

'Subject to value, we expect divestments through trade sales and reductions of our stakes in large listed GLCs to continue and accelerate over the medium term,' Mr Azman said. 'We're open for business.'

The agency has made money from that business. According to Mr Azman, Khazanah had realised gains of RM3.6 billion by selling RM12.6 billion worth of assets such as Bintulu Port, PTP Port, RHB Bank, Tradewinds Hotels and Time Dotcom.

Meanwhile, the agency even made money last year. Mr Azman said that 'in spite of a severe fall and diminution of asset prices globally', the agency recorded a 'modest' pre-tax profit of RM128 million in 2008.

In the five years between 2004 and 2008, he added, it recorded pre-tax profits worth RM5.7 billion and paid RM2.3 billion in dividends and taxes to the government, an increase of 16 per cent and 228 per cent respectively over the preceding nine years, going back to its inception in 1994.

The last five years has been exactly the length of Mr Azman's tenure at Khazanah and the figures he revealed of his agency's contributions to Kuala Lumpur during the period said much about his leadership. Khazanah has interests in many of Malaysia's key sectors from banking to telecommunications.

It could also buttress his position given the fact he was widely criticised when he disclosed Khazanah's mark-to-market losses at the beginning of the year. That is especially important given that his contract is up for renewal in June next year.

Mr Azman stressed that Malaysia's growth was sub-optimal and needed to reach 7-8 per cent a year which, in turn, required 'a new economic imperative.' For that to happen, the nation needed to make investment in more, higher value-added sectors including the services sector whose growth, he noted, had remained relatively stagnant since.

It could be in that vein that Khazanah later released a statement yesterday stating that it had invested US$25 million in Small Bone Innovations Inc, a US-based specialised orthopaedics firm.

The money was part of a larger US$109 million funding package with other investors that included Goldman Sachs. With Khazanah's investment, the statement said, the orthopaedics firm would set up its Asia-Pacific hub in Kuala Lumpur.