MGBF Special Report: PNB to back companies with global potential

Fund's confidence in top homegrown multinationals bodes well for long term prospects

KUALA LUMPUR,Malaysia,Jan. 29,2019 -- According to the Malaysia Global Business Forum (MGBF) research team,Malaysia's biggest fund manager Permodalan Nasional (PNB) should remain committed to local companies with global competitiveness and opportunities despite challenging market conditions.

Under the new federal government,PNB is now headed by former Bank Negara Malaysia (BNM) governor,Tan Sri Dr Zeti Akhtar Aziz,who was appointed the fund's group chairman last July. Although some analysts say that PNB may take a more prudent approach under Zeti,the research team feels that PNB will still invest heavily in companies with strategic national interests.

With stakes in some of the largest corporate players in every sector,all eyes will be on PNB's corporate moves in the next few years under the new government. Investors will monitor any possible shifts in the fund's investment strategy.

Approximately 70% of PNB's funds are invested in the local stock market and public equities. They include industry giants such as Sapura Energy Bhd (oil & gas),Malayan Banking Bhd (financial),Axiata Group Bhd (telecommunications),Sime Darby Bhd (diversified) and SP Setia Bhd (property).

The companies stated above are prime examples of PNB's investments in companies with global potential.

Despite the volatile oil and gas market,PNB is still confident in Sapura Energy's turnaround plans and the company's potential for returns in the long term. Last year,Sapura Energy raised RM4 billion from a rights issue that will be utilised to pare down debts. In November,Sapura Energy announced the proposed sale of a 50% stake in its wholly-owned subsidiary,Sapura Upstream to Austria's OMV AG (OMV). The company's original cost of investment in the assets is US$ 896m (RM3.7bn).

The deal will translate into a disposal gain of RM2.5bn (net of RM39m proposed transaction expenses). The proceeds from this deal will also be used to reduce its debts.

In 2017,Malayan Banking (Maybank) achieved a historical corporate milestone. The bank's total market capitalisation crossed the RM100 billion mark. It was the first company on Bursa Malaysia to hit this landmark.

In 3Q18,Maybank posted loans growth of 4% year-on-year (y-o-y),led by its Malaysian operations (+5%). Its growing business segment included consumer-based loans (+7%),specifically mortgages (+8%),auto loans (+5%) and unit trust financing (+7%).

In 2017,Sime Darby went through a major restructuring exercise to create more long term growth and value for investors. It spun off its plantation and property businesses that are now separate listed entities on the main market of Bursa Malaysia.

Only about 15% of group revenue comes from Malaysia,while 70% of its 20,000-strong workforce is based overseas.

SP Setia is an established property giant with not only major projects in Malaysia,but also overseas such as the prestigious Battersea Power Station development in London,a joint venture with Sime Darby and the Employees Provident Fund (EPF).

Last month,it was announced that SP Setia and Sime Darby Property will be selling their stake in the Battersea Power Station project for RM8.351 billion (1.583 billion pound)to PNB-Kwasa International 2 Ltd,a joint venture vehicle between PNB and EPF. The transaction is expected to be completed in the first quarter of 2019.

Axiata Group is the country's leading telecommunications company with almost 300 million subscribers and 25,000 employees across Asia. In 3Q18,Axiata Group posted core net profit of RM318m. Its operations in Indonesia under Axiata XL sustained its growth momentum in the same quarter with 4.9% and 3.1% quarter-on-quarter (q-o-q) growth in revenue and earnings before interest,taxes,depreciation and amortisation (EBITDA) respectively.

Malaysia Global Business Forum was established in 2009 to assist the global business engagement between Malaysia and the world.The MGBF team offers a range of consulting services from business matching,stakeholder engagement,strategic business development,policy development,advocacy and research services for companies and trade associations expanding their market share. For more information visit www.MalaysiaGlobalBusinessForum.com.

Photo - https://photos.prnasia.com/prnh/20190129/2359463-1