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Khazanah posts weak results; plans to revamp fund under two groups

Move comes at a time when Prime Minister Mahathir is looking to raise money for government coffers

Kuala Lumpur

MALAYSIAN sovereign wealth fund Khazanah Nasional has unveiled a new investment strategy that classifies its portfolio into a commercial and a strategic fund, even as it reported weak results for last year.

The restructuring comes at a time when Malaysian Prime Minister Mahathir Mohamad is looking to raise money for government coffers, depleted by a fiscal deficit and a massive debt from a multi-billion-dollar scandal at state investment fund 1Malaysia Development Bhd (1MDB).

"Our performance in 2018 was affected by several key global and domestic developments," Khazanah's managing director Shahril Ridza Ridzuan, who took charge of the fund in August 2018, told reporters on Tuesday.

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"At the same time, the government initiated a reset of Khazanah, which involved significant changes including a refreshed mandate," he said.

It was reported last month that Khazanah was planning for a new investment playbook aimed at delivering more cash to the government by pruning its stakes in non-strategic assets.

According to the Reuters report, Khazanah, traditionally more of a strategic investor, had split its investments in over 100 firms spanning more than 20 countries under the two new categories.

Khazanah said on Tuesday that its investments in companies, including 27 per cent-owned CIMB Group Holdings, 36 per cent-owned telecommunications firm Axiata Group, and Alibaba would be part of its commercial fund.

The commercial fund will target a return equivalent to Malaysia's Consumer Price Index plus 3 per cent on a five-year rolling basis.

Firms such as state utility Tenaga Nasional, struggling Malaysia Airlines - which Khazanah took over four years ago - Malaysia Airports Holdings and Telekom Malaysia will be part of Khazanah's strategic fund.

Khazanah said the realisable asset value of its portfolio value fell to RM136 billion (S$45.2 billion) in 2018 from RM157 billion in the previous year.

It swung to a loss before tax of RM6.27 billion in 2018 from a profit before tax of RM2.89 billion in 2017, hit by fewer divestments, higher impairments and lower dividend income.

Also on Tuesday, it was reported that Khazanah was weighing a sale of Legoland Malaysia Resort. The theme park, located in Johor Bahru, could be valued at around RM1 billion including debt.

This is according to a group of people with knowledge of the matter. They asked not to be identified because the information is private.

Khazanah is considering the potential divestment as part of its review of non-core assets. Legoland Malaysia is owned by a Khazanah unit and operated by Merlin Entertainments.

It is the first Lego-themed park in Asia, covering an area equivalent to over 50 soccer fields, with more than 15,000 Lego models made from over 60 million bricks.

No final decisions have been made, and Khazanah could decide to keep the property, the people said.

Khazanah will consider selling Legoland if there is a good offer, managing director Shahril Ridza Ridzuan said at press conference on Tuesday in Kuala Lumpur. The fund is not currently in talks with anyone, he added. REUTERS, BLOOMBERG