Since Permodalan Nasional Bhd (PNB) has been successful in asset management and has over the years delivered handsome returns to its account holders that are majority bumiputera investors, it raises a question now why it should be made to divest five of its non-core holdings to just a few bumiputera companies.
Prime Minister Datuk Seri Najib Razak announced last Thursday that Khazanah Nasional Bhd and PNB would each divest five of their non-core holdings/companies to bumiputera companies through open tender. According to Najib, the 10 companies have been identified.
“In the case of Khazanah, the intention could be to allow qualified bumiputera entrepreneurs to help grow some of the companies, especially if they are non-core ones. But questions arise why PNB should be made to divest its holdings when it has brought good returns to its investees who are majority bumiputera. Its annual dividends have been higher than other local funds and the companies it invests in are professionally managed,” said an industry observer.
He added that PNB has a stated bumiputera agenda since its inception. Hence, he said it would make more sense to keep those so-called non-core holdings within PNB to benefit the wider bumiputera community, rather than divesting them to a few bumiputera companies. He maintained that ideally, any such decision on asset disposal should be driven by market forces.
“With PNB, the fruit of the assets are enjoyed by a larger bumiputera community which are millions of account holders. But now the government wants them to off-load some of their non-core holdings to just a few bumiputera companies. This doesn’t really increase the overall levels of bumiputera ownership, but transfers ownership from a lot to a few,” said the observer.
“PNB has been a very astute investor and has done well in raising returns for its stakeholders,” he said.
He hoped that PNB would be able to get the best price for its five non-core companies, and that the fund ensures potential buyers have synergies with those companies.
PNB is an entity under the government’s New Economic Policy (NEP) which was conceived after the 1969 race riots to promote national unity through equal wealth distribution.
Incorporated in 1978, PNB’s aims are to promote bumiputera share ownership in the corporate sector, and to develop opportunities for suitable bumiputera professionals to participate in the creation and management of wealth.
PNB set up its wholly-owned subsidiary Amanah Saham Nasional Bhd (ASNB) in 1979, which operates as a vehicle to accumulate funds through its first unit trust fund Amanah Saham Nasional (ASN), launched in 1981.
It now has 10 unit trust funds with 79 billion units in circulation and nine million bumiputera and non-bumiputera account holders.
It is worth noting that PNB is sitting on assets of over RM120 billion (based on 2010 numbers). On average, its investments have yielded at least 8.5% in terms of annual returns to unitholders for the past five years.
In comparison, the Employees Provident Fund (EPF) provided returns to unitholders of less than 6%, Lembaga Tabung Haji 4.5% to 7% and Lembaga Angkatan Tentera (LTAT) between 15% and 16% over the same period.
In December last year, ASNB announced an income distribution of 7.65 sen per unit and a bonus of 1.15 sen per unit for Skim Amanah Saham Bumiputera (ASB) for FY11 ended Dec 31.
The income distribution is 0.15 sen higher than the 7.5 sen a unit paid out in 2010. The income distribution involved a total payout of RM7.04 billion, an increase of 21% over the RM5.82 billion paid out in 2010. The bonus involved a total payout of RM628.29 million.
Up until Dec 15, 2011, ASB recorded a gross income of RM7.19 billion. Dividend income from investee companies contributed RM4.09 billion or 56.9% of the gross income. Profit from the sale of shares made up RM2.25 billion or 31.3% with the rest derived from investments in short-term instruments and others.
Among the bigger companies PNB has invested in are Sime Darby Bhd in which it owns a 48.14% stake valued at around RM28 billion.
One of the smaller companies where PNB has a large stake is Bonia Corp Bhd. The fund holds a 32.99% stake in the leather goods company.
PNB’s largest and highest dividend-yielding investment is Malayan Banking Bhd. The fund, via ASB and PNB directly, owns about 51.4% of the country’s biggest bank.
It also owns 46.42% in UMW Holdings Bhd, which in turn controls Perusahaan Otomobil Kedua Sdn Bhd (Perodua).
PNB also invests in little known companies such as Formosa Prosonic Industries Bhd, which makes high quality speakers. It has a 22.4% stake in Formosa.
Other companies in PNB’s portfolio include Mesiniaga Bhd, Malaysian Building Society Bhd, Eng Teknologi Holdings Bhd and property developer S P Setia Bhd, for which it recently launched a revised takeover offer with the latter’s president and chief executive Tan Sri Liew Kee Sin.
PNB also has about 170 directors on the boards of 138 companies in which it has significant investments.
This article appeared in The Edge Financial Daily, February 13, 2012.
