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Private Equity (PE) Industry Outlook

KUALA LUMPUR: Government-owned private equity (PE) firm Ekuiti Nasional Bhd (Ekuinas) expects the number of PE deals in the year to continue trending lower, as there is a mismatch between the valuation that companies are demanding and what investors are willing to fork out.

“There were many deals that happened in the earlier part of this year, which we deem expensive. That, unfortunately, has set the tone for some of the deals we were working on [as] people are just expecting too high of a valuation,” its chief executive officer (CEO) Syed Yasir Arafat Syed Abd Kadir told reporters yesterday.

On the sidelines of “The Malaysian Private Equity Forum 2019” of the group here, he said the situation had made many people wary, especially concerning PE investments.

“We want to continue being disciplined throughout [our investments]. So, I think from our perspective, we just stay focused and make sure we pay what a company is worth,” said Syed Yasir.

Ekuinas chairman Raja Tan Sri Arshad Raja Tun Uda concurred, saying the fund’s objective is “to get certain returns every year” and so it must be disciplined to ensure it gets the right price for anything it goes into.

“The trend [of overvaluation] would probably continue but I am not quite sure whether the trade war between the US and China will have any bearing,” Syed Yasir said, adding that it depends on whether entrepreneurs become more realistic concerning the valuations of their companies.

On whether Ekuinas is on track to meet its internal rate of return target of a minimum 12%, he is non-committal.

“It really depends because it’s a long-term target. So, from our perspective, we do what we [do] best. Clearly there [are] some headwinds in Malaysia’s general business environment [but] I will not speculate. I’m not going to say that you’re not going to see that 12% because our results will only be out by April next year,” said Syed Yasir.

Meanwhile, he said Ekuinas is looking to divest three of its assets towards end-2019, without providing details other than saying these divestments may “spill over into the next year”.

As at Sept 30, 2019, Ekuinas’ total funds under management stood at RM4.1 billion.

Syed Yasir also reiterated that Ekuinas is eyeing certain government-linked companies’ (GLCs) non-core assets, adding that there is no fixed timeline to complete these deals as it depends on when the GLCs want to begin their divestment programmes.

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