KUALA LUMPUR (March 2): Khazanah Nasional Bhd said today it achieved a record profit from operations at RM7.36 billion in 2019 compared to a loss of RM6.27 billion in 2018, contributed by higher divestment gains and lower impairments, besides robust portfolio returns.

In a statement today, Malaysia's sovereign wealth fund said gains on divestments increased to RM9.9 billion from RM1.4 billion, while impairments fell to RM4.9 billion from RM7.3 billion.

Khazanah declared a dividend of RM1 billion for 2019.

"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 reduction and debt repayment.

"Khazanah strengthened its financial position with expenses reduced by 28.2% to RM484 million, compared to RM674 million in 2018. This equates to 35 basis points (bps) as a percentage of assets, compared to 50bps the previous year. Debt was reduced by 17.0% to RM45.8 billion from RM55.2 billion in 2018, while realisable asset value cover improved to 3.0 times from 2.4 times," Khazanah said.

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's 3% on a five-year rolling basis.

The Commercial Fund’s net asset value stood at RM73.1 billion, as at Dec 31, 2019, it said.

The Strategic Fund achieved financial and strategic outcomes for specific assets despite the sluggish market in 2019.

"Khazanah conducted regular engagement with the government to enhance the regulatory landscape, refreshed and strengthened the leadership bench at investee companies, and commenced restructuring initiatives to improve financial performance and unlock value.

"The Strategic Fund generated an overall return of 2.9%, versus its targeted rate of return of the 10-year Malaysian Government Securities yield on a five-year rolling basis," Khazanah said.

Khazanah managing director Shahril Ridza Ridzuan said in the statement that its 2019 performance was achieved against a backdrop of uncertainties in the global landscape, which saw a prolonged Brexit process as well as the heightening of the US-China trade war.

"This was made more challenging by the continued low returns environment and generally slower economic growth. Despite these challenges, we managed to achieve significant progress in delivering on our mandate to grow Malaysia’s long-term wealth,” Shahril said.

Khazanah also said it will continute to evaluate options to resolve key issues facing loss-making Malaysia Airlines Bhd. It has shortlisted four of of nine proposals received last year.

"For 2020, Khazanah will continue to work closely with the government and Malaysia Airlines to further review the proposals and finalise a decision on the appropriate strategic option moving forward," it added.

Looking ahead, he said 2020 will be particularly challenging for Khazanah, which owns stakes in PLUS Malaysia Bhd and Malaysia Airlines, as an already uncertain global economy is harmed by the ongoing Covid-19 spread.

While the government’s stimulus package is a welcome response, Khazanah said it is nevertheless preparing for a period of global economic slowdown.

“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,” he said.