PETALING JAYA: Ekuiti Nasional Bhd (Ekuinas), the government-linked private equity (PE) fund management company, is exploring potential investments in up to six companies to date this year.
“We have currently about five or six companies in the pipeline (potential investments). Clearly, some of these will go into more advanced stages, in terms of due diligence and so forth,” Ekuinas CEO Syed Yasir Arafat Syed Abd Kadir told the media after launching Ekuinas’ 2021 annual report.
Syed Yasir added that Ekuinas was presently not looking at divesting stakes in its portfolio of companies, as “we are coming off the back of two years of the Covid-19 pandemic” and some pandemic affected companies had underperformed.
Regarding Icon Offshore Bhd, where Ekuinas has a 56.9%% stake, Syed Yasir said the company is looking at various strategy options.
“We feel that Icon’s current market valuation is not reflective of its performance, as it has been back in the black for the past two years,” he said.
Chairman of Ekuiti Nasional Berhad (Ekuinas) Raja Tan Sri Arshad Raja Tun Uda delivers his speech during the Ekuinas 2021 results announcement
Icon is the largest offshore support vessel (OSV) provider and one of the largest in South-East Asia in terms of number of OSVs, and it also owns and operates a jack-up drilling rig within Malaysian waters.
As for Flexi Versa Group Sdn Bhd (FVG), which Ekuinas acquired in April 2018 and has a 76.1% stake, Syed Yasir said the company is looking at potential targets for FVG to acquire.
FVG is involved in the design, manufacturing and assembly of consumer products, injection moulding, die-cutting of thermoplastics and electro-mechanical components, printed circuit board assembly and manufacturing of graphic digital interfaces for the electrical and electronics industry.
“In the past, we have explored two to three targets for FVG to acquire, unfortunately, none of those came to fruition. We intend to grow FVG capability beyond what they have now,” he said.
Meanwhile, in a statement, Syed Yasir said: “Ekuinas expects 2022 to be the year we truly emerge from the pandemic.
“We anticipate that economic activity will improve for many of our portfolio companies as the economy bounces back gradually and the country opens its borders.
“In 2021, digitalisation was an impactful theme for us with almost all our portfolio companies undergoing digitalisation enhancement as a critical core of business operations and will continue to be a guiding force as we move forward.”
As of the financial year ended Dec 31, 2021 (FY21), Ekuinas’ total cumulative investment stood at RM4.4bil which comprised 70 investments and consequently generated a total economic deployment of RM5bil, together with private sector partners.
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In FY21, in terms of direct investments, the Ekuinas Direct (Tranche II) Fund recorded strong growth with a gross portfolio return of RM654mil, generating a gross internal rate of return (IRR) of 12.1% per annum and a net IRR of 8.6%, marking a significant increase from 2020 which saw the fund recording a gross portfolio return of RM571.2mil.
In FY21, Ekuinas recorded a consolidated revenue growth of 12.1% and earnings before interest, tax depreciation and amortisation (Ebitda) growth of 28%, well above FY20’s performance of negative 12.8% and negative 14.9% respectively.
Ekuinas chairman Raja Tan Sri Datuk Seri Arshad Raja Tun Uda noted that in FY21, Ekuinas had increased the total bumiputra equity ownership in its portfolio companies to RM5.9bil, or 1.5 times of capital invested, as compared to RM5.6bil in 2020.
“We also helped to increase the pool of bumiputra managers and employees by 19.4% for bumiputra managers and 12.3% for bumiputra employees, up from 13.3% and 10.5% respectively in 2020.
“These have contributed towards increasing the total shareholders’ value for portfolio companies to RM7.7bil, or two times of the invested capital as compared to RM7bil in the previous year, reflecting Ekuinas’ success in leveraging on the PE business model to promote wealth creation for bumiputras and all Malaysians,” he added.
Syed Yasir said in 2021, the PE market’s performance in Malaysia was relatively subdued despite growth in funds and asset allocation with the pandemic situation mid-2021 delaying broad-based recovery in economic activity.
“However, with the steady and gradual rebound that we see, we are ready to capitalise on opportunities that are aligned to our investment strategies.
“Our investment strategy has always been for the long term. A volatile market masks true value of companies hence we made a conscious decision to keep our cash reserves intact in spite of the healthy investment pipeline,” he said.
Syed Yasir added that Ekuinas had executed a follow-on investment of RM11mil in Orkim Sdn Bhd which was completed in April 2021 to support the company’s working capital requirements as well as fund the start-up costs of newly-built vessels.
Orkim Sdn Bhd (95.5% owned by Ekuinas) was acquired in December 2014, and is one of Malaysia’s leading clean petroleum product (CPP) tanker companies with 17 vessels under ownership.
Orkim transports CPP from refineries to various oil storage terminals throughout the country and currently has an estimated 40% market leading share.
“In navigating the new normal, we kept our operations lean and focused. It was also integral that we implemented value-creation activities, building in greater efficiencies to future proof our portfolio companies to support their top-line growth while also positioning some of our holdings for successful exits in 2022, expediting realisation initiatives to ensure solid fund performance,” said Syed Yasir.