Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily, on April 29, 2016.

 

KUALA LUMPUR: It may be easier for Ekuiti Nasional Bhd (Ekuinas) in terms of deal-making this year as it has a few acquisitions in mind, but the government-linked private equity fund acknowledged that it would not be easy to execute its exit strategy in relation to the Ilmu Education Group this year via a public listing.

Its new chief executive officer Syed Yasir Arafat Syed Abd Kadir said market sentiment currently is not conducive to successfully list Ilmu. As such, Ekuinas is looking at several options in terms of this particular investment.

“There are lots of initiatives to make sure that Ilmu is on a better footing. Whether we are exiting this year or not, it doesn’t really matter. We just need to make sure that it produces a good set of results going forward,” said Syed Yasir Arafat during a media briefing on Ekuinas’ funds performances for the financial year ended Dec 31, 2015 (FY15).

Ilmu was originally intended to be listed by end-2015 or early-2016, according to Ekuinas’ announcement in March last year, but the fund has been delaying the listing plan since.

Meanwhile, it is looking to make its maiden retail investment and it is expecting to finalise the deal in three months. Its target acquisition is “one of the market leaders in the country”, according to Syed Yasir Arafat.

“We see a fair bit more deals that could potentially happen in 2016, but the overall weakness is still there, so we have to pick and choose winners,” Syed Yasir Arafat.

Further, Syed Yasir Arafat said Ekuinas has no plans to divest more shares in its 42.48%-owned offshore support vessel arm Icon Offshore Bhd, given the distressing valuations in which many oil and gas (O&G) related companies are now trading.

“I think Icon Offshore should be valued a lot higher, as the current market is in a short-term knee-jerk reaction to the overall O&G industry. There is more opportunity for Icon Offshore,” he said. The company, which was listed in June 2014 at the price of RM1.85, closed at 36.5 sen yesterday.

The O&G sector, still reeling from crude oil price crash, made up 40% of Ekuinas’ portfolio.

It is inevitable that the private fund will have a huge exposure to the sector with it making up a major part of Malaysia’s economy and the high level of bumiputera participation, said Syed Yasir Arafat.

“Yes, we will see a somewhat different composition [of sectors going forward]. We are keen to develop new industries and sectors. Among the ones we have invested in this year and last are in the technology and healthcare space.”

In FY15, Ekuinas posted a gross portfolio return of RM591.3 million for its Ekuinas Direct (Tranche I) Fund, which translates into a gross annualised internal rate of return (IRR) of 14.8% and a net annualised IRR of 10.9%.

This tranche, which has a heavier size of investment in Icon Offshore, managed to post positive returns despite the drop in oil prices, said Ekuinas.

Its second fund, Ekuinas Direct (Tranche II) Fund, meanwhile, posted a gross return of RM133.3 million, bringing its gross annualised IRR to 13%, and a net annualised IRR of 5.7%.

These returns, according to Ekuinas, exceeded its IRR above the minimum target of 12% annually.

Ekuinas undertook nine direct and outsourced investments with a total committed capital of RM338.7 million. These investments include a 60% stake in MediExpress (Malaysia) Sdn Bhd and PMCare Sdn Bhd, and additional capital for its education portfolio.

Its investments in the Burger King franchise for the Malaysian and Singapore markets posted negative returns of RM23.3 million and RM27.5 million, respectively. “We realised that the QSR (quick service restaurants) business requires a long gestation period and big capital investments, which do not fit our risk appetite,” Syed Yasir Arafat said.

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