Malaysia’s Ekuinas bullish on deal uptick, to realise investments in second fund

Image taken from Ekuinas website.

Malaysia government-linked private equity fund Ekuiti Nasional Bhd (Ekuinas) is looking to intensify its deal sourcing efforts and tap thematic investment opportunities in fast-growing digital sectors.

“Following the pandemic, we see a growing potential in companies within the healthcare and digital solutions industries. We hope to seize any opportunities that may add value to our portfolio,” Ekuinas said.

Ekuinas’s original target sectors include oil and gas, education, retail & F&B, FMCG, healthcare and services. Over the years, it has also broadened its focus to include digital solutions and manufacturing.

“Our role is more important than ever to identify high potential companies that may have found themselves in distressed situations [post the pandemic]. The challenge we saw in 2020 will continue to be seen in 2021 as the crisis will persist,” Ekuinas noted.

At the same time, the PE firm is also targeting to realise its investments from its second fund this year.

“One of the focus [areas] for the year is the process of crystalising our second fund, Ekuinas Direct (Tranche II) Fund, which we target to close by end of this year,” according to Ekuinas.

In 2019, the Ekuinas Direct (Tranche II) Fund, which has been fully deployed, recorded a gross portfolio return of 582.9 million ringgit ($142.25 million) and an IRR of 13.5% per annum, exceeding its internal target of 12%.

DealStreetAsia has learnt that the state-linked PE firm may be weighing the sale of its interest in clean petroleum product tanker firm Orkim Sdn Bhd this year, as part of its move to realise investments in its second fund.

The Ekuinas Direct (Tranche II) Fund invested in Orkim back in August 2014. Orkim is the only asset that is currently part of the fund portfolio.

On the impact of the pandemic on its deal momentum, Ekuinas said its investments and divestments are mid-term plans, which have already been set in motion.

“To some extent, we are mindful that there may be delays due to the disruption, but it should not affect our overall strategy. We remain firm in holding on to our investment values and discipline regardless of the situation, to ensure we continue to be selective and invest into quality deals,” it added.

In 2019, Ekuinas had said it will earmark 10-15% for technology investments. Asked if Ekuinas will increase the allocations following the pandemic-induced acceleration in digitalisation, the firm said, “technology has been a key beneficiary and has done well in the past year. We continue to remain highly interested in further opportunities in this sector.”

Expand Table

Ekuinas' investments/divestments (Jan 2019 - Apr 2021)

DateCompanyDeal Value ($) Stake (%)IndustryTotal capital invested ($)
Investments
Feb 2021Medispec (M) Sdn Bhdundisclosed-Pharmaceutical-
March 2019Exabytes Capital$10.72m40Cloud service $10.72m
Divestments
Oct 2020Coolblog Apps Sdn Bhdundisclosed60Retail - Food & beverages12.38m
Aug 2020PrimaBaguz Sdn Bhdundisclosed100Food manufacturing9.75m
July 2019APIIT Lanka Pvt Ltdundisclosed45.9Education4.95m
Apr 2019MediExpress Groupundisclosed60Healthcare14.33m
Apr 2019PMCare Sdn Bhdundisclosed60Healthcare5.11m
Source: Ekuinas website, annual report

PE deal momentum to pick up in Malaysia

The government-linked PE fund is optimistic of an uptick in investment activity in Malaysia given the availability of surplus dry powder globally coupled with a low-interest rate regime.

“With an estimated $1.9 trillion in dry powder globally in a low-interest-rate environment, it is highly likely that the hunt for good assets will continue to be very competitive. It is no different for Malaysia. As a result, further PE interest in Malaysia is to be expected and welcomed. Growing competition will help to nurture further development for the Malaysian PE industry, and add to the vibrancy of PE deal-making in Malaysia,” Ekuinas said in a statement to DealStreetAsia.

In 2020, due to the speed and unprecedented impact of the pandemic, it noted that the PE market in Malaysia initially saw a sharp drop in terms of deal-making as fund managers shifted their focus on stabilising their portfolio companies.

Moving into 2021, PE investors demonstrated a bullish outlook on the backdrop of the worldwide vaccination rollout, the new US presidency and Brexit finally coming to a close. “This optimism is expected to continue over the next 12 months as investors look to effectively deploy the funds,” Ekuinas said.

Fund performance

Ekuinas has made cumulative investments in 42 companies since its inception in 2009, representing a total committed investment of 4.4 billion ringgit ($1.09 billion).

Ekuinas has direct exposure to homegrown companies such as sportswear retailer Al-Ikhsan Sports; private education group Cosmopoint; lighting solutions firm Davex (Malaysia); contract manufacturer Flexi Versa; offshore service vessels provider Icon Offshore; tanker operator Orkim; Manhattan Fish Market-owner Revenue Valley; and private higher education institution Unitar International University.

Ekuinas had, in October last year, divested its entire 60% holding in homegrown desserts and beverages firm Coolblog Apps Sdn Bhd to Singapore-based PE firm Archipelago Capital Partners. The divestment generated an internal rate of return of 6.4% for Ekuinas.

Prior to that, in August 2020, the PE firm had exited halal meat-based food maker PrimaBaguz Sdn Bhd to US-based Johnsonville International LLC for an enterprise value of RM175 million ($41.96 million).

Expand Table

Fund performance in 2019

FundGross IRR per annum
Ekuinas Direct (Tranche II)13.5%
Ekuinas Direct (Tranche III)-10.8%
Ekuinas Outsourced (Tranche I) 7.4%
Ekuinas Outsourced (Tranche II)-5.2%
Source: Ekuinas annual report 2019

The PE fund’s outsourced fund managers include Cope Private Equity, Navis, RM Capital Partners, TAEL Partners and Tremendous Asia Partners.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.