In a presentation to investment managers on Dec 9, 2009, Ekuinas proudly announced that it is a government-linked private equity fund management company that promotes equitable and sustainable Bumiputera economic participation via the creation of Malaysia’s next generation of leading companies. It was even noted that Ekuinas wanted to increase meaningful employment in key skilled areas.

Nor Yakcop.However, the past two years has witnessed the repeated inconsistencies in the administration of the Government’s assets. Yesterday, the firm announced that it will be taking up an 85.76 percent stake in Revenue Valley for RM64.7 million. Revenue Valley owns and operates three popular F&B brands – Manhattan Fish Market, Tony Roma's Malaysia and Popeyes. Last year, it bought controlling stakes in the local franchise of Burger King and coffee chain San Francisco Coffee for RM98.3 million in total.

The F&B business is a business known for its low-barrier to entry and hence stiff competition. Margins are thin and majority of its employees are unskilled. So, how do these acquisitions comply with Ekuinas charter when it was first launched? Being a private equity firm, how does Ekuinas expect to generate more than 25 percent per annum returns?

It’s appalling to note that Revenue Valley has 47 outlets across the three brands and its revenue came in at nearly RM100 million in the financial year ended September 30 2010. How did Ekuinas justify a valuation of RM75.44 million for Revenue Valley? Even at best, a margin of 10 percent means a profit of RM10 million which is 7.5 times price-earnings multiple, which is bloody expensive for an unlisted company. In layman, it would take 7.5 years to recoup investment.
 
To-date, Ekuinas has invested among others into Tanjung Offshore, Alliance Cosmetics, Konsortium Logistik, Burger King, San Francisco Coffee and Revenue Valley. Out of these six companies, only one company (Tanjung Offshore) qualifies as a Bumiputera company.

Maybe the Prime Minister should intervene before another mismanagement surfaces. And for goodness sake, in the future the Government should stop using the Bumiputera trump-card as a supporting rationale in its policy when it was never intended to.

Time to rotate the management of Ekuinas? Tan Sri Nor Yakcop, please let me know if you need my CV.

*The views expressed here are the personal opinion of the writer.