KUALA LUMPUR: Khazanah Malaysia staged a turnaround in the financial year of FY19 with profit from operations of RM7.36bil compared to a loss from operations of RM6.27bil in 2018 as it braces for a challenging year due to the Covid-19 coronavirus and global slowdown.

The sovereign fund said Monday it posted record profits from operations which were contributed by higher divestment gains and lower impairments, and robust portfolio returns.

“Gains on divestments increased to RM9.9bil compared to RM1.4 billion, while impairments were at RM4.9bil from RM7.3bil the previous year. Khazanah declared a dividend of RM1bil for 2019, ” it said.

Khazanah managing director Datuk Seri Shahril Ridza Ridzuan said: “Our 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.”

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 (opex) reduction and debt repayment.

Commenting on its debt, Khazanah said debt was reduced by 17% to RM45.8bil from RM55.2bil in 2018, while realisable asset value cover improved to three times from 2.4 times.

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 + 3% on a five-year rolling basis.

The Commercial Fund’s net asset value was RM73.1bil as at Dec 31,2019.

“One year into its portfolio rebalancing exercise, Khazanah has progressed significantly towards diversifying the Commercial Fund under the refreshed mandate and is well positioned to increase its investment activities in 2020, ” it said.

On the outlook, Shahri said 2020 “will be particularly challenging as an already uncertain global economy is harmed by the ongoing Covid-19 spread”.

He added while the government’s stimulus package is a welcome response, "we nevertheless are 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 added Khazanah will continue to focus on further diversifying the Commercial Fund, while working with the government to enhance relevant regulatory frameworks, embedding Environment, Social and Governance (ESG) considerations across all investment activities, and engaging investee companies on value creation initiatives.