Intense competition in PE space may lead to distortion of asset value: Ekuinas

Image taken from Ekuinas website.

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.

Also read:

Malaysia’s Ekuinas open to foreign investments via portfolio of companies

Malaysia: State-owned PE Ekuinas picks controlling stake in electronics firm Flexi Versa

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.