Asian Islamic Private Equity

Kuwait Finance House (Malaysia)

November 2008

About KFH (Malaysia) Private Equity

Established in 2006 and based out of Kuala Lumpur, Malaysia
Pioneer and one of the largest fully Shariah Compliant Islamic Private
Equity Fund based in South East Asia
Investment footprints in India, China, Singapore, Philippines and Malaysia
Closed 7 investments to date in various sectors including healthcare,
manufacturing, waste management and retail food and beverage
Fund investors from Middle East, Brunei and Malaysia
Investors base comprises of mainly High Net Worth Individuals and
Institutional (both Financial and non-Financial) investors
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Developing an Islamic Private Equity Fund

Developing the Private Equity Fund Investment Strategy and Focus
Understanding the fund market and investor pool
Identifying and profiling of potential fund investors
Direct marketing vs JV with local investment co
Optimal distribution channels
Investors participation ~ investment and management
3

Peace of Mind and Value

Executable strategy supported by management track record
Member of the Shariah Board
Familiar/favoured markets and sectors
Exposure offered by the funds
Acceptable fund terms
Additional value and participation
4

Developing Fund Strategy and Principles

Geographic vs Industry Focus
Direct Equity ~ Mezzanine ~ Debt with equity kicker
Shareholding ~ management participation
Industry focus ~ economics and dynamics
Region or country focus
Lifecycle
Fund and investment size
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Kuwait Finance House (M) Private Equity

Al Faiz Fund I

Asian Focus Targeting Mid Market Investments

o Geography

o Investment
Size

Asia Pacific namely South

East Asia, China and India

USD5mn to USD25mn

Robust
economic growth
emerging Asian countries

Emerging economies contributes

more than half the global output

Home to large Muslim population

and greater investment opportunities

Typically exclusive
negotiated

and

in

privately

Favorable valuation and structure

Optimal investment size to cost ratio
o Charter
Fund Life

5 Year with 3 One Year

extension

Greater room to build value

Flexibility on exit planning
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Control Focus and Diversified Deal Base

o Equity Interest

o Deal focus

Significant minority; up to
100% equity interest

Buyout MBO and MBI

Distress and turnaround

Expansion capital

Special situation

Active participation in direction setting

and management control

Facilitate the conversion of investee

non-Shariah financial instruments

Facilitate restructuring (distress deal)

Facilitate exit option ~ trade sale or

IPO

Deal driven by strong and motivated

management team

Favorable valuation for operationally

healthy enterprises

Create value through strengthening of

balance sheet & cash flows
8

Positive Dynamics and Track Record

o Company
attributes

Established track record

Market or near market leader

Entrenched market position with

visible revenue base and growth
drivers

Value drivers are identifiable and

realizable

Controllable
operational
management risks

Sustainable earnings base and

established platform for expansion

Expensive and time consuming to

replicate the business models and
infrastructure

Attractive target for MNC trade

buyers and/or competitors

and

High barriers to entry

M&A opportunities and scalable

platform for regional expansion

Achieved or near economies of

scale

Diversified earnings base

9

Positive Economics and Shariah Compliant Sectors

o Industry
attributes

Competitive advantage within

the selected market/country

Stable and less vulnerable to

Value can be created through a well

developed strategic growth plan

Enterprise

value

is

driven

adverse economic and

discretionally management

plan

commodity cycles

rather

and

than

economic

commodity price cycles

Less fragmented market ~

oligopolistic

Profit margin can be sustained over

mid-to-long term

Long term and sustainable

demographic advantages

Acquisitive and listable

Sustainable

growth

driven

by

demographic and/or social structure

Multiple and attractive exit options

10

Growth Sectors in the Asia

o Preferred
sectors

Healthcare

Hospitals,
Specialist

Education

Pre-school, Private School, Tertiary,

Training

Halal Food Processing

Aquaculture, poultry, confectionery,

beverage, cereal, food ingredients

Retailing

F& B (halal) , households, specialty,

pharmaceutical

Consumer Care

Personal care,
elderly care

Waste Management

Light
manufacturing,
medical, packaging

Manufacturing

Collection, transfer and disposal

Primary,

Diagnostics,

baby/child

care,

industrial,

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Active Participation and Committed Management

o Participation

o Management
attributes

Executive committee

Value creation initiatives

Board control

Direction setting

High professional-to-investee ratio

Secondment of professionals

Active monitoring and

performance target setting

Realignment of management and

investors interests

Strong and direct industry

experience and knowledge

Able to develop clear strategic

growth plan

Clear objectives and business plan

Able to identify and capitalize on

growth opportunities

Incentives and motivated

Demonstrable execution
capabilities

Able to execute planned initiatives

Able to
changes

response

on

market
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Managers Need to Understand the Market

o Fund
Terms

Fund Structure

Type of fund structure

Investment Objectives

Targeted return/IRR

Investment Restriction

Fund principles/Industry

Target Fund Size

Target (and maximum allowable)

PE Fund Charter Life

Years and extension terms

Transfer of Fund Shares

Conditions for transfer

Dividend Policy

Pre defined policy and target

Distribution Policy

Capital, hurdle rate & carried interest

Management Fees & Expenses

Annual fees and deal expenses

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And Deliver The Mandate

o PE Fund
Mandate

Fund Principles

Shariah compliance

Industry and product/ services

restriction

Non-Shariah compliance financial

instruments

Financial ratios

Dividend Policy

Periodic targeted distribution

Targeted Return

IRR realization and MM on cash-on-cash

basis

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Al Faiz I Private Equity Fund

Thank You
Lew Oon Yew
Head Private Equity
Kuwait Finance House (Malaysia) Berhad
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