KUALA LUMPUR: Khazanah Nasional Bhd's investment of 300 million yuan (RM150 million) in Oriental University City Ltd (OUC) in Hebei province, China, has raised more questions than confidence, said DAP national publicity secretary Tony Pua.
In a statement today, Pua, who is also the member of parliament for Petaling Jaya Utara, questioned Khazanah's investment role, strategy and philosophy following the government investment arm's recent acquisition of a 10% stake in OUC.
"Is Khazanah a strategic investor meant to play an active role to bring and develop key industries and technologies in Malaysia via mega developments such as the multi-billion Iskandar Malaysia project?
"Or is it a strategic investor in Malaysian companies to help provide local firms with the necessary capital and financial backing for success, such as its holdings in PLUS Expressways, Malaysian Airline System Bhd, Malaysia Airports Holdings Bhd, Silterra semiconductors as well as many prior failed projects such as the Langkawi prawn farming project?
"Or has it now become Malaysia's sovereign wealth fund taking up portfolio investments in businesses overseas without a strategic role in them, such as the 10% OUC investment where Khazanah is neither experienced in the education sector, nor does it have the scale and leverage to manage its Chinese investments?" Pua asked.
He cited Khazanah managing director Tan Sri Azman Mokhtar as claiming that the latest investment was part of Khazanah's China and education services strategy giving "exposure into the exponential growth potential of China's education services sector".
"The pertinent question to ask then is "What is Khazanah's 'China and education services strategy'? How much funds has Khazanah allocated to its China or education services portfolio or is this investment more "opportunistic" in nature, and isn't really part of any strategy?" Pua questioned.
Pua said a review of Khazanah's existing portfolio companies showed not a single "education services" provider was in sight, whether in or out of Malaysia and when reviewing the details of the acquisition, more questions arose, for not only had Khazanah turned itself into some form of portfolio investor, but it had also become a "pre-IPO" venture capitalist.
"Its valuation of OUC at three billion yuan with its 2009 net profit of 52 million yuan meant that Khazanah paid an astronomical historical price-earnings (PE) ratio of 58 times for its purchase.
"In addition, the acquisition is valued at more than eight times OUC's net book value. It is clearly a high-risk transaction for the investment is predicated on a stock exchange listing in 2013," Pua said.
For comparison, Pua said at today's prices for substantially lower risk, but equally exciting global growth prospects, Khazanah could have purchased Apple Inc for a PER of 24, Google Inc for a PER of 26 or even Amazon.com Inc at the same PER of 58.
"Why did Khazanah pick an investment in Hebei which is expensive, high risk and illiquid?"
Pua asked if Khazanah should not be focusing its energies on ensuring the success of Iskandar Malaysia which was today threatened with not only declining investments but also investor withdrawals. He said this was to ensure that its RM7.6 billion investment in the project over five years would generate reasonable returns to the government and the rakyat.
"Instead, its out-of-the-blue investment in education services provider all the way in Hebei, China, drains the confidence of Malaysians in Khazanah's ability to professionally manage the wealth of the nation," Pua said.