Issue 29

Khazanah says made healthy profit with Malaysian Shoaiba stake sale

Malaysia’s $33-billion sovereign wealth fund Khazanah Nasional Bhd on Monday said it made a “healthy profit” by selling its 40 per cent stake in Desaru Investments Limited (DIL) to power and water producer Malakoff Corp Bhd. 

The fund said it decided to exit its investment in the company since its commercial objectives had been met. On Friday, Malakoff announced it is acquiring Khazanah’s entire stake in DIL, which, in turn, owns 40 per cent of Malaysian Shoaiba Consortium Sdn Bhd, which owns stakes in power and water plants in Saudi Arabia, for a cash consideration of $70 million. 

Malakoff, via Malakoff Gulf, also owns a 40 per cent stake in the consortium, while Tenaga Nasional Bhd holds the remaining 20 per cent. Khazanah said its 40 per cent stake in the DIL was offered to existing partners in accordance with the consortium’s shareholders agreement. 

Malakoff subsequently took the offer, allowing the fund to exit at a value based on future cash flows of the project. “Assets may be considered for divestment once the intended investment objectives and targeted returns have been achieved, as is the case with the divestment of our stake in the consortium. 

Divestments may also depend on the strength of the market, as well as the availability, quality and credibility of buyers,” it said. Khazanah said the proceeds from the divestment will be reinvested based on the objectives of its commercial and strategic funds or to repay the existing debt on its balance sheet. For the year to date, Khazanah has commitment investments amounting to about 1.4 billion ringgit ($340 million) and reduced overall debt by about 6.4 billion ($1.56 billion), in line with its corporate strategies. 

“We further expect to undertake more investments in the second half of 2019, based on the opportunities that we are exploring,” it said. Malakoff plans to fund the all-cash deal using internally-generated funds. It said the proposed acquisition will increase and consolidate its total effective generation capacity for power and water to 6,708 megawatt (MW) and 544,375 cubic metres per day, respectively. 

“This will provide immediate earnings accretion to the company as well as [an] increase in cash flows, derived from the remaining contract periods of approximately 10 years under both Shuaibah Water & Electricity Co Ltd’s (SWEC) power and water purchase agreement for Shuaibah 3 independent water and power plant, and Shuaibah Expansion Project Company’s (SEPCO) water purchase agreement for Shuaibah 3 expansion independent water plant,” said Malakoff CEO Ahmad Fuaad Kenali. 

Commissioned in January 2010, the Shuaibah 3 independent water and power plant is the first and largest of its kind in Saudi Arabia. The Shuaibah 3 expansion, meanwhile, was commissioned in 2009. The Shoaiba consortium has a 50 per cent equity interest in Saudi-Malaysia Water & Electricity Co Ltd (SAMAWEC), which in turns owns a 60 per cent stake in SWEC, and 60 per cent in Shuaibah Expansion Holding Company (SEHCO) which owns a 97.5 per cent stake in SEPCO.


From – Deal Street Asia


Chinese cloud robotic firm CloudMinds seeks to raise $500m in US listing

CloudMinds, a Chinese intelligent cloud robot developer backed by SoftBank Vision Fund, has filed to raise up to $500 million in an initial public offering (IPO) in the US, joining a throng of China-based firms seeking to list away from home. 

The company’s filing with the US Securities and Exchange Commission is heavily redacted and the $500 million target is likely a mere placeholder. It also has not specified the number of shares it intends to offer in the IPO. 

The IPO application comes as the four-year-old robotics firm raised $300 million in a SoftBank Vision Fund-backed funding in March, giving the Masayoshi Son-led fund a 34.6 per cent pre-IPO stake in the company. CloudMinds aims to sell half a million of its robots this year to Chinese customers from banks and malls to hospitals. 

“We have built and operate an open end-to-end cloud robot system and offer it as a service to the world,” the company said. Its signature machine is the XR1, which for nearly $50,000 comes equipped with voice, motion, and vision as a platform that other developers can then write software to customize. Its XR1 can hold an egg, sew with a needle and pour water. 

Its machines, which can function as guards in a residential complex or as service droids, combine internet computing power with in-device processing, Chief Financial Officer Richard Tang said in an earlier interview with Bloomberg. 

While still a newcomer in the industry, CloudMinds said its total revenues increased by 529.1 per cent from $19.2 million in 2017 to $121 million in 2018. However, its total revenues decreased by 62.1 per cent from $32.7 million in the first quarter of 2017 to $12.4 million in the same period of this year. 

The company said the decrease in revenues from cloud AI solutions can be attributed to the delivery timing of purchases related to smart city projects. CloudMinds intends to use the net proceeds of the offering for research and development of products, services, and technologies, and for potential strategic investments and acquisitions, among others. 

The company’s IPO, if it pushes through, comes at a time when intelligent robots become increasingly prevalent in factories, warehouses, hospitals, hotels, shops, and homes around the world. 

According to Frost & Sullivan study quoted by CloudMinds, the market size of total global robotics, measured by sales value, increased from $48.4 billion in 2016 to $75.5 billion in 2018, a 25 per cent annual rise. The market is expected to hit $201.0 billion in 2023. On the other hand, the market size of the total global cloud robotics is expected to grow to $103 billion in 2023 from $1.6 billion in 2016. 

A number of Chinese companies have trooped to the US seeking to raise funds via IPO, even as Beijing has laid out various programs and incentives to lure companies to list at home. In April, So-Young International, a Matrix Partners China-backed online marketplace for plastic surgery services, has filed to raise $150 million in an IPO in the US. 

Meten International, a Chinese provider of online-to-offline (O2O) English language training (ELT) for adult students, also filed to raise $100 million in the US. Last month, the much-anticipated Science and Technology Innovation board officially launched in Shanghai, marking the government’s major step in drawing high-potential tech companies to list. The board, however, still has to see the applications of the country’s significant tech players.

From – Deal Street Asia

Huawei to invest $3.1b in Italy over next three years: country CEO

China’s Huawei Technologies said it would invest $3.1 billion in Italy over the next three years, as the Chinese telecoms giant called on Rome to ensure the “transparent, efficient and fair” use of its ‘golden power’ on 5G network development. 

Speaking at an event in Milan on Monday, the chief executive of the telecoms giant’s Italian unit, Thomas Miao, said Italy’s golden power – which allows the state to intervene in the private sector in the defense of national security – should be extended to all vendors in the European Union. 

Italy recently beefed up the measure due partly to concerns over the potential involvement of Huawei and fellow Chinese company in the development of 5G networks, a government source said on Friday. 

Miao said Huawei would add 1,000 jobs in the country over the next three years. He also confirmed the Chinese company would cut 1,000 jobs in the United States. He said if the company is kept on a blacklist in August by Washington, it has “a plan B” to guarantee supplies of components. 

The United States has lobbied Italy and other European allies to avoid Huawei equipment and also to closely scrutinize ZTE, alleging the vendors could pose a security risk. Both companies have strongly denied any such risk. 

Decree Italy’s ruling coalition, forged a year ago between the anti-establishment 5-Star Movement and the far-right League, endorsed China’s ambitious “Belt and Road” infrastructure plan in March, becoming the first major Western power to back the initiative to help revive the struggling Italian economy. 

The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies. In a move to soothe the U.S. worries, Rome passed a decree last week strengthening its powers in infrastructure projects that involve the rollout of the country’s 5G telecoms network. The decree must be approved by parliament in the next 60 days or it will expire. 

Huawei Italia’s Miao called for the 5G golden powers to be applied not only to non-EU companies but also to all EU vendors. “It is very important that the 5G technology is neutral,” Miao said adding that the new norms should apply “to all players to make sure that from day one we have a safe and reliable infrastructure”. . 

He also asked the government to speed up its approval procedures. “In the worst case scenario up to 165 days may be needed to get approval for deals regarding 5G,” Miao told reporters, adding this was too long a period of time. 

Telecom Italia and Vodafone Italia are expected to finalize soon a deal to jointly roll out 5G infrastructure in Italy. Both companies were waiting for the decree to decide how to deal with Chinese partners such as Huawei. 

Miao said that, in the meantime, the company “is doing business as usual” with its partners in Italy.

From – Deal Street Asia

AU’s Carbar raises $16.8m from IAG, private investors to grow car subscriptions

Australian car subscription platform Carbar raised $16.8 million from IAG, the country’s largest general insurer, and private investors. Founded in 2016, Carbar is Australia’s first car subscription platform, catering to customers seeking alternative modes of vehicle ownership. The deal saw IAG taking a majority stake in the company. 

According to a statement, Carbar plans to use the capital raised to expand its vehicle subscription model while supporting the growth of its online car trading platform. Going forward, the company plans to expand its services to new cities across Australia. In June, it forayed into Sydney. The deal enables IAG to focus on emerging mobility trends that are guided by rising demand for flexible car subscription services. 

The deal will see both IAG and Carbar collaborate on marketing, technical support, and distribution opportunities to cater to customers’ mobility needs. IAG’s executive general manager of innovation James Orchard said: ‘Carbar has pioneered the car subscription model in Australia. We look forward to combining its world-class digital capabilities with IAG’s assets and scale to provide new mobility experiences for customers today and in the future.” 

Des Hang, CEO and co-founder of Carbar said that the automotive industry is reaching an inflection point with massive changes towards car ownership happening across Australia and globally. “New car sales for combustion engine cars are down globally, and Australia isn’t immune from this trend. 

Earlier this year, we saw the merger of two of Australia’s largest car dealership operators as a result. Carbar is operating and growing around these trends, so we believe we will be well-positioned to capitalise on these new markets that are emerging as a result of it,” said Hang. Carbar last raised a $5.8 million venture round in August last year, according to Crunchbase.

From – Deal Street Asia

The valuation of Byju’s surged by $2 billion to $5.5 billion in its ongoing Series F funding round, an unprecedented jump within a single round, as investors clamoured for a piece of the education startup that has reported dizzying growth. 

Byju’s, India’s most valued ed-tech company, has so far raised ₹3,159.4 crore ($460.8 million) in the round, led by investors such as South Africa’s Naspers, private equity firm General Atlantic, and Canada Pension Plan Investment Board, shows data sourced from business information platform 

The firm first raised capital in the ongoing Series F round in December, giving it a valuation of $3.5 billion. In the fourth round in the first week of July, it raised $86 million ( ₹589 crore) at a valuation of $5.5 billion. Such valuation differences within a round are uncommon. Experts said the valuation jumps are a function of Byju’s rapid growth. 

Bengaluru-based Think and Learn Pvt. Ltd, which runs Byju’s, grew its revenue threefold in the year ended 31 March to ₹1,430 crore and turned profitable on a full-year basis. “It is likely that it is commanding steep increases in valuation on a month-on-month basis, not year-on-year, as other startups might,” said Vivek Durai, founder of “Among India’s unicorns, Byju’s has the highest leverage today vis-a-vis prospective investors.” 

Its expansion into grades I-III and entry into the US market have contributed to the valuation jump, investors said. Byju’s is benefiting from Indian parents’ willingness to spend on education to give their children an edge. It has already attracted more than 35 million students, assisting them to understand concepts in maths, science and English. 

Byju’s growth is expected to continue as it expands its learning programmes for K-12 students and ventures into new markets. “Given that in ed-tech there are not too many other large companies available to invest, Byju’s will attract a premium. 

There are other parameters such as customer acquisition costs, life-time value of users, which is also much higher for Byju’s than other competitors,” said an investment banker on condition of anonymity. There could still be more valuation jumps. In many cases, investors are offered a different set of rights and conditions such as liquidation preference and anti-dilution protection. 

“An amount that an investor pays for a stake in a startup or a new-age company could include an insurance premium for certain rights like liquidation preference and anti-dilution protection. The value of these rights could be as high as 20% of the total investment amount with the balance (80%) being the value of the pure equity,” said Santosh N., senior adviser-valuation at Duff and Phelps, one of the largest valuation service providers in the world. 

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From – Deal Street Asia
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