The COVID-19 pandemic and stay-home orders to contain the virus may have brought economic activities in many countries to a halt but Malaysia’s private equity firm OSK Ventures International Bhd (OSKVI) has not stopped looking for opportunities and will continue to invest, with a focus on business-to-business (B2B) tech companies.
“We have a few transactions that are in the negotiation stage right now. We continue to be open for companies to reach out for mentorship and funding,” OSKVI executive director Amelia Ong told DealStreetAsia in an interview.
“We are working on deals that had started before MCO (Movement Control Order) and as such (some of these deals) should be able to be closed within the next two months. We continue to be in a pipeline-building mode.”
The ACE Market-listed company will continue its strategy to invest in revenue-generating firms in the B2B space.
“Right now, companies that can scale and have proven products and services will be the target of investors in the next 12 to 18 months,” Ong said.
In view of the challenging times and uncertainties brought by the pandemic, she said it is even more important now to continue its focus on the B2B sector.
“OSKVI has been focusing on the B2B sector across Southeast Asia, instead of consumer-facing businesses. Some of our portfolio companies own proprietary solutions. These B2B tech companies enable corporations, ranging from small to large, to increase efficiency and as such, have the ability to grow faster and stronger,” she said.
Last year, OSKVI recorded three new investments in cloud-based lending solutions provider Turnkey Lender; South Asian mobile financial services platform Project E-wallet; and platform for forex traders Spark Systems Pte Ltd.
OSKVI led a Series A round for TurnKey Lender along with Vertex Ventures SEA & India and Western NIS Enterprise Fund.
The current pandemic and economic situation have compelled a necessary change in the way businesses operate. This has become especially beneficial to technology-enabling products for companies, Ong said.
“The good news for Malaysia is that there are a number of local companies providing such products. For example, in our portfolio, Involve Asia, which provides companies with performance-based marketing software solutions, has seen strong growth during the MCO period,” she added.
Listed on the then MESDAQ Market in 2004, OSKVI is the venture capital and private equity affiliate of Main market-listed OSK Holdings Bhd, the second-largest shareholder of RHB Bank Bhd.
OSKVI provides equity capital to commercialised startups to late-stage high growth companies seeking expansion capital for restructuring purposes or to grow the company to the next level.
To date, it has invested, nurtured and divested more than 17 investee companies to an initial public offering on Bursa Securities and the AIM market of the London Stock Exchange and/or to a trade sale status. It also invests in public-listed companies in both the domestic and overseas markets.
Moving forward, Ong expects fundraising activities in the PE space in Malaysia will continue albeit at a slower pace.
“There will be more investors’ money flowing in for revenue-generating businesses, or what mainstream calls them as Series A and Series B. So more money is going to that rather than the early-stage startups,” she added.
“There are companies that are still looking for funding but a lot of PE firms are taking a wait-and-see approach. We will maybe see more virtual pitches due to the travel restrictions,” she said.
The firm also expects to complete one or two deals of venture debt in the next six months.
“We have been able to provide this instrument to some of our portfolio companies. But for the Malaysian market, we have just launched it during the MCO period. It’s a new product here. So there’s more education that needs to be done,” she added.
With venture debt, she said companies will be able to get financing to grow their companies without dilution of equity of the existing shareholders.
Out of the 14 companies the firm invested, eight are from Singapore, four in Malaysia, one each from Cayman Island and the United Kingdom, its annual report showed.
Seven of the companies are in fintech business, while the rest are in edtech, enterprise tech, green tech, education and e-commerce.
Although OSKVI does come across opportunities in advanced economies in Asia including Japan and South Korea, Ong said the firm will continue its focus on Southeast Asia.
“Southeast Asia is a fantastic market. It’s a huge, growing market. For any company in the region, the next country or market of growth will usually be another neighbouring country within the region. There is definitely a lot of synergy and cost-sharing,” she said.
She said there are a lot of e-commerce activities going on in the region and there is strong digital growth as well. “Companies here are savvy. They want to grow faster. That’s why our focus is always on the B2B sector. Our portfolio companies have solutions that can enable Southeast Asia companies to do so,” she added.
OSKVI fell into the red in the first quarter ended March 30, 2020, posting a net loss of RM17.66 million as compared to a net profit of RM1.34 million a year ago, mainly due to the net fair value loss on financial assets.
The net fair value loss was due to the global equity market sell down that occurred in March 2020 which peaked on March 23, 2020. This selldown was attributed to the heightened panic arising from the market expectation on the potential adverse impact from the Covid-19 pandemic, the company said in a filing to the local bourse.
As at the end of December 2019, its private investment portfolio stood at RM72.4 million($17.34 million) across 14 companies in the technology, education and waste industries. Its public investment portfolio mainly invested in Malaysia (RM67.4 million), Hong Kong (RM9.3 million) and United States (RM2 million). Its last closing price of 39 sen gives it a market capitalisation of RM77.06 million.