Malaysia -based, government-linked private equity (PE) firm Ekuiti Nasional Bhd (Ekuinas) is targeting an ambitious 20% internal rate of return (IRR) for next year. Recent profitable exits from invested companies and a successful Outsourced Fund Programme (OFP), have spurred the PE fund to “aggressively” seek investment opportunities;and it has more funds to do so.
The PE fund’s success has had the government adding an additional MYR 600 million ($180 million) to the MYR 2.4 billion ($ 719 million) already allocated to the company.
Ekuinas has already facilitated a capital deployment of $ 839 million (MYR 2.8 billion), in the domestic companies, directly as well as through the OFP, an initiative that has helped garner international PE interest in Malaysian companies.
Profitable Exits Spur higher IRR
Ekuinas has been making profitable exits from its investments. This has led it to target an ambitious 20% internal rate of return (IRR) next year. Among the key exits it has made are Konsortium Logistik Sdn Bhd to DRB-Hicom Bhd, in which it made a MYR 106.4 million ($ 32 million) gain last year, and the listing of offshore support vessel operator Icon Offshore Bhd in June.
While Icon Offshore has has a shaky performance, since its initial public offering (IPO), Ekuinas has managed to book a profit of 523.6 million ($ 157 million) through its partial exit from the company.(Icon Offshore’s share price has declined 26.5% since its IPO).
Recently, it was reported that Ekuinas was in discussions to sell its Burger King franchise to Brahims Holdings Bhd. The firm is also aiming to list its education business Ilmu Education Sdn Bhd in early 2016.
The OFP Factor
The company, which has a mandate of encouraging indigenous equity ownership in the country, has become one of the major players in the Malaysian PE space. Direct investment by the fund and investments in partnership with other funds (through the OFP), has seen 28 Malaysian companies receive financing in the past three years. Recently, the fund has been concentrating on its OFP investment. So far, it has allocated MYR 640 million ($ 191.7 million), in two tranches, for its outsourced fund programme. Of that, MYR 232 million ($ 69.5 million) has been deployed in 11 companies.
Ekuinas OFP partners includes Navis Capital Partners, CIMB Private Equity, Tremendous Asia Partners (Malaysia) Ltd (TAP; formerly Asiasons Private Equity (Malaysia) Ltd), TAEL Partners, RM Capital Partners, Tuas Capital Partners and CMS Opus Private Equity.
Aggressive Investment Strategy
In 2014, Ekuinas has invested MYR 450.1 million ($ 135 million) out of the year’s allocated investment capital of MYR 500 million to MYR 600 million ($ 150 million to $ 180 million). As for the remaining MYR 100 million to MYR 150 million ($ 30 million to $ 45 million), Ekuinas said in an email that it continues to look for new investments aggressively, though “each investment needs to go through rigorous due diligence as well as undertaken in strict confidence”.
“We remain a firm believer that the six sectors (oil & gas, services, education, retail & leisure, fast moving consumer goods and healthcare) still represent high potential sectors for investment given they are part of the National Key Economic Areas,” Ekuinas said.
While Ekuinas has been questioned if its access to big funds ‘crowds out’ other PE firms, it said it does not see that happening, as Ekuinas targets the mid-sized market, which has fewer PE players.The firm also clarified with local media that it has itself missed deals where other PE firms have been more competitive, offering higher prices.
Ekuinas was established during the tabling of the Malaysian budget 2010. It is allocated a total of MYR 5 billion ($ 1.5 billion) until 2015.