Equity investors instrumental in recovery of local SMEs post-Covid

To be patient is to endure some short-term hardship for a future reward as ‘patience is bitter, but its fruit is sweet’

Pic by MUHD AMIN NAHARUL

WHEN Covid-19 hit Malaysia more than a year ago, the government’s main priority was to tackle the pandemic and overcome any health emergencies that ensued. The hopes of triumph were further reinforced as vaccines were made available at the start of this year.

With about 17% of the population having received at least the first dose, the strive to contain the pandemic is becoming slightly manageable. This has subsequently shifted the attention to efforts in driving the country out of the pandemic-led economic recession, while being confined to a certain degree of limitations from the imposition of the Full Movement Control Order (FMCO).

Unlike previous economic recessions, this one was not caused by failures in the financial system, as such, entities like investment or private equity (PE) firms are now stacked with dry powder from idled or limited investment activities, while businesses are very keen to get back to “normal” with renewed perspective on survival.

This is a classic example where and how equity investors can play a critical role by bringing capital and industry expertise to the table, making vital investment decisions, especially in high-growth areas, potentially preserving jobs and creating more high-skilled employment opportunities for the increasing number of unemployed graduates, restructuring debts and helping companies staying afloat during this tough times.

In 2019, small and medium enterprises (SMEs) accounted for 98.5% of business establishments in Malaysia, 38.9% contribution to GDP, 48.4% of the country’s workforce, and 18% of total exports — suggesting the survival of SMEs as vital to the country’s economy.

The many stimulus packages demonstrate the govt’s continuous commitment to speeding up economic recovery

As an industry player, equity investors can play a significant role by enabling businesses to make forays into new technology-driven, high value-added industries by capitalising the long-term prospect of supporting and resuscitating the growth of these local businesses.

This, to a certain extent, will be able to restore both the lives and livelihood of the society at large.

Among the pandemic’s most pronounced impact was the spurring of more creativity and innovations that the world has witnessed in decades.

As investment and PE firms are no stranger to disruptive innovations that change the status quo, this presents a myriad of investment opportunities, especially in companies offering high value-added products or solutions.

Fortunately for VentureTECH, guided by our three broad investment focus areas — bio-based and biotechnology; emerging technology that focuses on Industrial Revolution 4.0 (IR4.0) and the Internet of Things convergence; and green industries — we are now diving into strategic areas, such as health and food security, via our approved investment pipeline in biosimilar joint venture with one of Malaysia’s leading pharmaceutical companies in the pursuit to battle the growing chronic diseases in Malaysia, while allowing access to affordable healthcare, and into precision farming in agro-based sector.

Additionally, understanding the gravity for Malaysia to boost localisation from the global vaccine distribution issues, among others, VentureTECH is on a mission to increase higher localisation of critical products and services, by building higher competence in systems and production engineering, and IR4.0 areas in the targeted high value-added industries.

As a start, we hope to support investments in local vaccine development and higher value-added rail system segments.

On the road to Malaysia’s economic recovery, VentureTECH together with other equity investors shares the government’s mission to revitalise and empower our local businesses, which is evident through various financial stimulus packages and national plans.

The Prihatin Rakyat stimulus package, Penjana (Short-term Economic Recovery Plan), Pemerkasa (Strategic Programme to Empower the People and Economy), MyDigital Blueprint, Shared Prosperity Vision 2030, the recent Pemulih (People’s Protection and Economic Recovery Package), the upcoming 12th Malaysian Plan and several others demonstrate the government’s continuous commitment to speeding up economic recovery and ensuring an inclusive growth.

VentureTECH has for the third time implemented recovery measures for MCO that provide immediate six-month moratorium to our investee companies, while intensifying our value creation growth plan for them.

Having invested mostly in Bumiputera companies that are technology leaders in their respective industries, VentureTECH has continuously strived to broaden market opportunities for its investees to not just level the playing field, but to further expand their skills, technological competencies and more importantly, the ability to withstand challenging and uncertain economic climate.

Moving forward, this year, we are looking to kick-start our maiden initiative in fund management with our strategic partners and creating impactful synergies with like-minded reputable regional industry leaders for the benefit of not just our investee companies, but the public at large, through the socioeconomic multiplier and spillover benefits that we hope to generate as an impact investor.

For the greater good, we also applaud and would like to further encourage our fellow investment and PE firms to not just continue assisting our local companies, but to grow together with them with purposeful long-term goals, while they harness and realise their fullest potential in rising above and beyond the pandemic.

Despite the massive ructions of 2020, and our search for the most disruptive of innovations, there are still some fundamentals that haven’t changed. Certain industry trends may have changed but, in most cases, a solid and well-managed business with a tenacious founder and strong leadership team remains a valuable investment; and writing as a patient investor, we should stick around to realise its long-term value.

The late “Father of Value Investing”, Benjamin Graham stressed the importance of patience in investing when he said patience and investing are natural partners.

To be patient is to endure some short-term hardship for a future reward. As Aristotle best puts it, “Patience is bitter, but its fruit is sweet”.

  • Dr Norida Abd Rahman is the MD of VentureTECH.

The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.