Malaysia’s state-owned private equity firm Ekuiti Nasional Bhd (Ekuinas) has said that the highly competitive deal-making in the private equity space has resulted in a bullish psychological effect and environment, causing inflated price points and distortion of an asset’s true value.
“Over the longer-term, both [buyer and seller] sides may struggle to substantiate the investment value, which may be considered unrealistic as compared to the boom times,” said Ekuinas CEO Syed Yasir Arafat Syed Abd Kadir.
It was earlier reported that the firm is planning to launch a $400-million fourth fund in the fourth quarter of 2018. Its third fund – Ekuinas Direct (Tranche III) Fund – has a total size of RM1.5 billion ($369.88 million). At the end of the financial year 2017, about RM994.5 million ($245.23 million) had been deployed across 10 investments.
Ekuinas declined to comment on the upcoming fourth fund and said that details will only be disclosed once the fund has been established.
On staying ahead of the private equity curve, Kuala Lumpur-based Ekuinas maintains it has a home market advantage, as it claims to bring domestic network and knowledge, beyond just capital and operational value creation.
“We have a team that is local, but has international experience, across different industries. This mix of local expertise and insight together with international experience is a winning combination. With strong knowledge and network, we are also able to source deals, monitor and exit more effectively than our peers,” Syed Yasir told DEALSTREETASIA in an e-mail interaction.
He further added, “This is especially important as private equity deals are very nuanced. This means our team must be able to identify and value the non-financial merits of the company such as the strengths of the management team, their network and brand/reputation, working style and approach to business.”
He added that getting a sense of the people behind the business “has proven” to be the crux of the deal which, coupled with the knowledge of the market and players, will ultimately lead to successful exits.
This April, Ekuinas acquired a controlling stake in electronic turnkey and components manufacturer Flexi Versa Group, venturing out of its six initial investment target sectors – education, FMCG, oil and gas, retail, healthcare and services.
Syed Yasir had told this portal a few months back that Flexi Versa may not be the last manufacturing company that the PE firm would invest in. Ekuinas is also looking to divest one of the companies in its second fund although no further details were disclosed. Fund II’s portfolio comprises Icon Offshore Berhad, APIIT Lanka, Primabaguz, Revenue Valley, Coolblog, Orkim and Tranglo.
Ekuinas has recorded total realised proceeds of RM2.3 billion ($570 million) as of mid-May 2018. For its financial year ended December 31, 2017, Ekuinas recorded a Gross Portfolio Return of RM476.7 million ($117.55 million) for its maiden fund – Ekuinas Direct Tranche I Fund, translating to annualised gross Internal Rate of Return (IRR) of 10.1 per cent and net IRR of 6.5 per cent.
Its Direct Tranche 2 Fund recorded a Gross Portfolio Return of RM391.7 million ($96.6 million), achieving annualised gross IRR and net IRR of 14.6 per cent and 10.2 per cent, respectively. Meanwhile, Direct Tranche III Fund achieved Gross Portfolio Return of RM53.9 million ($13.29 million) with an annualised gross IRR of 10.7 per cent.
Ekuinas was established in 2009 by the Malaysian government to promote equitable and sustainable local economic participation through the private equity model.