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Ekuinas’ Private Equity Model

Objectives

Ekuinas is a commercially driven organisation with the primary objective of delivering financial value on its investments. The Company maintains strict commercial discipline by setting clear Internal Rate of Return (IRR) targets.

We firmly believe that only through financial discipline and value can the social objectives it pursues be sustainably achieved.

As a government-linked equity company, Ekuinas also has a social objective, which is to promote equitable and sustainable Bumiputera wealth creation and economic participation based on the principles of market-friendliness, merit and transparency via the creation of Malaysia’s next generation of leading companies.

 

Clear Investment Objectives
A Balance between Financial and Social Objectives
Financial Objectives
Commercially driven – Creating sustainable value
  • Financial target set as “hard/minimum” investment criteria
  • Minimum financial target of 12% IRR p.a.
  • Targets set in line with private equity benchmarks
  • Recognise only through financial discipline can social objectives be achieved sustainably
Social Objectives
To foster equitable Bumiputera economic participation across four dimensions
  • Enhance effective corporate equity ownership
  • Growing the pool of qualified and experienced management
  • Creating employment opportunities via growth in target sectors & companies
  • Creating value for supply chain partners

Operating Model

Ekuinas’ operating model consists of all the important functions which form the foundation of the business. Key policies were developed with the aim of ensuring a private equity practice that is on par with global standards and best practices. These policies encompass the Company’s direct and outsourced investments, the respective frameworks and guidelines, as well as those established for other areas of business including governance, disclosure, treasury, human resources, stakeholder management and communications.

INVESTMENT STRATEGY AND OBJECTIVE
INVESTMENT POLICIES (BUILDING BEST PROCESSES)

INVESTMENT PROCESS

  • Direct
    Investment
  • Pipeline
    Development
  • Due
    Diligence
  • Structure/
    Negotiate Deal
  • Implement
    & Monitor
  • Exit
  • Outsourced
    Programme
  • Identify Potential
    Managers
  • Due
    Diligence
  • Structure/
    Guidelines
  • Disburse
    & Monitor
  • Exit
SHARED SERVICES
Finance & Accounting, Treasury, Procurement & Administration, Corporate Social Responsibility, Stakeholder Management, Human Resources, Legal, M.I.S, and Communications

Investment Focus

Ekuinas’ investment focus is on established growth companies that demonstrate strong track records and are looking to expand to the next stage.

In order to avoid overlapping of roles between Government agencies, Ekuinas does not focus on start-ups or early stage companies which are more suited for venture capital investments and instead focuses more on established growth companies.

Ekuinas is mandated to support medium to large-sized Malaysian companies which are in the GROWTH stage – typically such
companies would have some operational track record and are able to identify opportunities to expand to the next stage.

BUSINESS LIFECYCLE START-UPS & MICROENTERPRISES DEVELOPMENT STAGE GROWTH LISTED / MATURE
Target Companies’ Attributes
  • Start-ups
  • Ideas on paper
  • Small scale
  • Commercial
  • Operations
  • Low / negative
  • Profits
  • Investment size < RM30 million, between RM1 million to RM15 million
  • Strong operational / profit track record
  • Looking to go to the next stage of growth
  • Investment size ~RM50 million

 

 

 

  • Large companies with established market positions, often with multiples subsidiaries / core businesses
Existing Institutions Programmes Examples of existing institutions and programmes include: Examples of institutions include:
Grants e.g.:
  • Cradle Fund Sdn Bhd
  • SME Corporation
  • Commercialisation of Research and Development Fund (CRDF)
  • BiotechCorp

Equity & Loan:
  • Perbadanan Usahawan Nasional Berhad (PUNB)
  • Modal Perdana
  • VentureTECH Sdn Bhd
  • Amanah Ikhtiar Malaysia Sdn Bhd (AIM)
  • Tekun
Equity & Debt:
  • Malaysia Venture Capital Management Bhd (MAVCAP)
  • Malaysian Technology Development Corporation (MTDC)
  • Perbadanan Nasional Berhad (PNS)
  • Perbadanan Usahawan Nasional Berhad (PUNB)
  • SME Corporation
    [facilitator]
  • Majlis Amanah Rakyat (MARA)
  • Malaysia Debt Ventures Berhad (MDV)
  • SME Bank
  • Pelaburan MARA Berhad 
  • Khazanah
  • Permodalan Nasional Berhad (PNB)
  • Lembaga Tabung Angkatan Tentera (LTAT)
  • Employees Provident Fund (EPF)
  • Lembaga Tabung Haji (LTH)
  • Other Unit Trusts

Target Sectors

Ekuinas may consider investments from all sectors, including Oil & Gas, Education, Fast Moving Consumer Goods (FMCG), Retail & Leisure including Food and Beverage (F&B), Healthcare and Services. These six (6) initial target sectors will continue to guide us in our investment strategy but we will also look at companies and industries that present good prospects and returns.

The Company will not, however, invest in gaming, liquor, or other illegal/unethical activities; hedge funds, derivatives or commodities; property and construction; and companies which do not contribute to the Malaysian economy.

NEGATIVE INVESTMENT LIST

  • Gaming, Liquor, Illegal & Unethical Sector/Business
  • Hedge Funds, Derivatives, Currencies, Commodities, Funds of Funds
  • Property & Construction
  • Businesses which are exposed to concentration risks especially those that rely heavily on a single source of revenue stream/customer
  • Companies with no Malaysian focus
  • No startups

Types of Investments

Ekuinas’ investment selection considers medium to large sized Malaysian companies in the following categories:

  • TYPE I
    Growth capital investment in Malaysian companies to accelerate growth;
  • TYPE 2
    Majority investment in strong Malaysian companies which demonstrate the potential to become market leaders; and
  • TYPE 3
    Buy-outs of non-core assets of any government-linked companies (GLCs), public-listed companies (PLC), multi-national companies (MNCs) or Trust foundations.

Investment Framework

Ekuinas aims to identify all opportunities to invest in mid-sized Malaysian companies to transform and grow them into sizeable market leaders and profitable investments, after which Ekuinas will exit and apply the same process of value creation in other deserving companies.

Ekuinas undertakes its investments via two simultaneous operations:

DIRECT INVESTMENT

where Ekuinas directly undertakes investments and focuses on larger deal sizes. These normally involve controlling or sizeable equity stakes to enable active participation and value creation for the companies and all stakeholders.

OUTSOURCED PROGRAMME

where Ekuinas undertakes investments through third party private equity firms appointed as fund managers. The Outsourced Fund Managers (OFMs) are responsible to raise additional external capital and manage the investments.


To avoid overlap, each investment operation has a different focus.

 

 

EKUITI NASIONAL BERHAD

 
     
     

Direct Investment

  • Explore co-investment to bring in private/external capital
  • Focused on buy-outs and controlling stake, so as to effect larger scale changes
  • Highly active shareholder - somewhat similar to conglomerate holding companies
  • Larger deal size (>RM30 million)
  • Focused on professional managers
  • Can take a longer term view on exit
 

Outsourced Programme

  • Must raise external capital (ratio of least 20%)
  • Focused on provision of growth capital where significant minority stake is acquired
  • Active shareholder that intervenes selectively
  • Smaller deal size (>RM10 million)
  • Focused on backing entrepreneurs professional management
  • 3 - 5 years' time horizon