KUALA LUMPUR (Oct 26): The government will not be injecting fresh funds into the state-owned private equity firm, Ekuiti Nasional Berhad (Ekuinas), next year, says the minister in charge of the Economic Planning Unit (EPU), Datuk Abdul Rahman Dahlan.

Hence, the PE fund will have to finance its own investments next year by using the returns it has earned from previous investments, he said.

The minister in the Prime Minister's department was speaking in response to a query from Gopeng member of parliament, Lee Boon Chye, today.

“Ekuinas still has its own funds to use for year 2017. We project that the investment needed for next year will be RM400 million, which will be financed by its existing funds, and from the returns [gained] through the disposal of equities from matured investments,” he said in Parliament.

Later in the Parliament lobby, he told pressmen that Ekuinas still has about RM2 billion cash in hand from previous investment returns, to finance its investment needs next year.

“That money is not committed and not used yet, so Ekuinas can use that money — about RM2 billion cash at the moment. RM400 million of that will be spent for investment in 2017.

“It means, for 2017, the government will not need to give money to Ekuinas, because it has its own money,” he added.

In chambers earlier, Abdul Rahman also said Ekuinas is planning to list retail sportswear business Al-Ikhsan Sports Sdn Bhd on Bursa Malaysia in the next three to five years.

“For investments like Al-Ikhsan, the purpose is to list the company on Bursa Malaysia in the next three to five years. From there, we can get the return or opportunity to divest so as to allow more Bumiputera companies to participate,” he said.

Ekuinas acquired a 35% stake in Al-Ikhsan for RM68.6 million in July this year, which marked its entry into the retail sportswear business.

As at June 2016, Abdul Rahman said the government has injected RM3.9 billion into Ekuinas since its inception in 2009, and Ekuinas has invested in 33 companies, 19 of which are under its direct investment portfolio (DIP), with the remainder under its outsourcing portfolio (OP).

“The period of investment under DIP is up to seven years, and it is eight years for OP. These investments are organised under different tranches that serve different investment purposes. Ekuinas's portfolio consists of businesses in fast-moving consumer goods, food and beverage, oil and gas, education and services, retail, and healthcare,” he added.

“Just like any other PE firms, investment returns will be achieved via asset divestments,” he added.

However, Abdul Rahman conceded that 2017 will remain a challenging year for Ekuinas to make divestments, given the lower valuations in general due to the more subdued business environment now.

“It is going to be a challenging year, no doubt. But I don’t believe they will go down below 12% of IRR (internal rate of return), because that is the mandate that was given to it,” he said.

“Nevertheless, when it comes to equity, when prices are depressed like (now), there are tremendous opportunities. If they go in and buy at very low prices, they might get much better returns in the years ahead,” he added.