Malaysia’s state-owned private equity firm Ekuiti Nasional Bhd (Ekuinas) is seeking to divest three of its portfolio investments by end of 2019 or early 2020, said CEO Syed Yasir Arafat Syed Abd Kadir on the sidelines of Malaysia PE Forum 2019.
The stake sale process has been ongoing but Ekuinas did not mention further details about the portfolio firms.
The Malaysian PE major had previously planned to divest its investment in offshore support vessels provider Icon Offshore. However, it is now looking to recapitalize the company and not opting for an exit from this business soon.
Aside from Icon Offshore, Ekuinas also intended to exit from its food and beverage portfolio Revenue Valley for which it had hired RHB as sell-side advisor earlier, but the process may not be conducted very soon.
The PE firm holds 88 per cent in Icon Offshore after it invested 484.1 million ringgit since November 2012, and it currently owns 85.8% in Revenue Valley after 82.6 million ringgit investment in January 2012, according to its website.
“These two firms are not included in the three companies divested this year,” Arafat told DealStreetAsia.
In the last 10 years, Ekuinas has 23 companies in its portfolio valued at 3.6 billion ringgit totally. Among these, Ekuinas has divested 11 companies with a total valuation of 2.6 billion ringgit. The divestment made by Ekuinas has covered 55 per cent of total Malaysia portfolios exit in the last 10 years.
The firm targets a minimum gross internal rate of return (IRR) for 12% per year, according to Arafat. Meanwhile, Ekuinas Direct (Tranche II) Fund posted a portfolio return of 490.1 million ringgit in 2018 and generated annual gross IRR of 14% and net IRR at 9.8%, as previously reported by local media.
In the future, Ekuinas wants to continue investing in Malaysian companies as mandated by its limited partners and it may not acquire overseas-based companies. However, the firm could support its Malaysian investment portfolios to expand into overseas countries, Arafat said.
On the other hand, Ekuinas still seeks to acquire the non-core subsidiaries owned by government-linked companies (GLCs) in Malaysia. However, there is no expected acquisition so far, as the plan will depend on the divestment programme by those GLCs.
So far, Malaysia is seen as the destination for mid-market deals in the $25 million to $80 million ticket size range in key sectors including F&B, retail, and education.
Following the investment situation in Malaysia, Ekuinas sees future trends in corporate spin-offs, industry consolidation and restructuring, along with an increase in deal transactions involving tech and renewable energies. It also predicts an increase in growth capital deals, as well as succession-related deals in industrialist-led companies.
In January 2019, Ekuinas launched its 1 billion ringgit Ekuinas Direct (Tranche IV) Fund with an option to increase the corpus to 1.5 billion ringgit, according to the company’s press statement. The fund will maintain its focus on investing in Malaysian companies across education, oil & gas, FMCG, retail & leisure, healthcare, and services.