Khazanah posts threefold jump in profits, to focus on home market

• "The strategy that we have here is really not to divest from public markets Malaysia but to basically be active in creating value in that portfolio. So [it's about] value creation for the Malaysian portfolio."

KUALA LUMPUR (March 12): Khazanah Nasional Bhd more than tripled its profits from operations in 2023 mainly due to higher dividends, and the sovereign wealth fund said on Monday that it plans to focus on its home market.

Profit from operations was RM5.9 billion in 2023, from RM1.6 billion in 2022, Khazanah said in a statement. Dividend income totalled about RM2.5 billion, thanks largely to payments from key holdings such as Tenaga Nasional Bhd, IHH Healthcare Bhd, and CIMB Group Holdings Bhd.

Khazanah's net asset value grew 4.9% to RM85 billion in 2023, from RM81 billion in 2022. The fund declared a dividend of RM1 billion for 2023 to the government of Malaysia, doubled from RM500 million in 2022.

“Our commitment remains as we continue to leverage our value creation efforts and portfolio rebalancing approach to strengthen our balance sheet and build a resilient financial position," managing director Datuk Amirul Feisal Wan Zahir said at a press conference on Monday.

For 2024, Khazanah plans to focus on assets at home amid volatile and uncertain global markets, he said.

Khazanah will "reshape" its Malaysian portfolio through a so-called mission-based approach to drive long-term returns and sustainable value, Amirul Feisal said.

The four key areas of Khazanah's Malaysian portfolio strategy are connectivity, energy transition, digitalisation, and catalytic/new growth areas.

"It's not gonna be easy because we have this global volatility that continues to happen. Having said that, I think when we have a resilient portfolio, we can try to manage it. But I do think that what we really want to capitalise on is the long-term investments, and the potential for growth is actually in Malaysia itself," he added.

Khazanah's investment portfolio achieved a one-year time-weighted rate of return of 5.7% in 2023 compared to a 5.7% decline in 2022, a five-year rolling return of 2.9%. The better returns in 2023 were driven by the developed market portfolio and a partial recovery of its listed investee companies in Malaysia.

Looking inward to Malaysia in 2024

When asked about Khazanah's divestment plans, Amirul Feisal stressed that the fund's aim is to build a resilient portfolio while making sure that all of the assets are giving the best returns to the portfolio.

"The strategy that we have here is really not to divest from public markets Malaysia but to basically be active in creating value in that portfolio. So [it's about] value creation for the Malaysian portfolio," he noted.

In 2023, Khazanah deployed RM7.3 billion in new investments and raised RM7.2 billion from asset monetisation.    

As at Dec 31, 2023, its investments portfolio realisable asset value, or investments with commercial returns expectations, stood at RM126.2 billion, compared with RM122.5 billion at the end of 2022.

In terms of asset class, more than half of Khazanah's investments were in Malaysian public markets while global markets made up 17.2% of its portfolio followed by global private markets at 14.7%, real assets at 9.4%, and Malaysian private markets at 5.8% .

This year, the global macroeconomic and market environment will remain challenging and volatile amid ongoing geopolitical conflicts in the Middle East, the continuation of the Russia-Ukraine war, and US-China competition, Khazanah said.

Additionally, a significant global election cycle involving 76 countries representing over 60% of the world's gross domestic product will introduce further volatility, Amirul Feisal flagged.

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