Ekuiti Nasional Berhad (Ekuinas), the government-linked private equity fund management company, is planning its entry into the retail sportswear business following the acquisition of a 35% stake in Malaysia's Bumiputera sportswear retailer, Al-Ikhsan Sports Sdn Bhd (Al-Ikhsan) for RM68.6 million.
The deal also includes the 100% acquisition and injection of the company’s homegrown sportswear apparel brand, AL Sports, under the Al-Ikhsan umbrella, to leverage on the increasing interest in health and fitness amongst Malaysians in general.
Branded sportswear retail sales in Malaysia are poised to grow 8% annually to reach RM2 billion by 2020, while in neighbouring countries such Singapore, Indonesia and Thailand, it is expected to grow past the RM13 billion mark in the same period.
With its market leading position in multi-brand sports retail in Malaysia, Al-Ikhsan is well placed to capitalise on this trend owing to Malaysians’ flourishing interest in sports as well as growing awareness of the importance of living an active and healthy lifestyle.
Ekuinas chairman, Raja Tan Sri Dato’ Seri Arshad Raja Tun Uda said, “Ekuinas is excited to enter the sports retail segment and what better way to do so than with Malaysia’s No. 1 sports retailer, Al-Ikhsan. The retail segment is one of Ekuinas’ six identified target sectors and our entry into the sports retail segment gives us a wider reach within retail. This acquisition extends the retail portfolio beyond our existing investments in F&B.”
He added that one of the main factors supporting the acquisition is that via Al-Ikhsan, Ekuinas has "the opportunity to back a highly capable Bumiputera entrepreneur with a view to transform the business into a stronger market leader with regional presence."
Established in 1993 by Tuan Haji Ali Hassan Mohd Hassan, Al-Ikhsan currently commands a 36% market share in the multi-brand sports retail industry encompassing sports equipment, apparel and footwear with 119 outlets in Peninsular Malaysia. Al-Ikhsan stocks 30 sporting brands including Nike, Puma and Adidas. With its rapid growth since 1993, Al-Ikhsan recorded its highest revenue in 2012 at RM278 million. At end 2015, Al-Ikhsan generated a revenue of RM257 million and a normalised EBITDA of RM23.2 million.
According to Ekuinas chief executive officer, Syed Yasir Arafat Syed Abd Kadir (pictured left), Ekuinas will follow through on its mandate to create industry leading groups in high growth sectors.
“To that end, Ekuinas will leverage on Al-Ikhsan’s strengths to execute the value creation plan to expand its reach to new markets, aside from strengthening core performance via operational improvements and supply chain optimisation.”
Ekuinas will be working closely with Al-Ikhsan’s founder and management team towards accelerating the local and regional expansion, either via organic growth or through the acquisition of existing speciality players in the market to reinforce its presence in under-penetrated cities in Malaysia, as well as entry into East Malaysia and neighbouring ASEAN countries.
Plans are afoot to roll out four new megastores in Kuala Lumpur and Perlis. Consumers in cities such as Kuala Lumpur and Penang can also look forward to Al-Ikhsan premium speciality stores in the mid to long term.
With Ekuinas’ support, Al-Ikhsan is also setting its eyes on the Sabah and Sarawak markets with plans to open six stores in Kuching and Kota Kinabalu by 2018. Regional plans at this point include the entry into other ASEAN markets, namely Indonesia and Thailand within the next three to five years.
Al-Ikhsan founder and chief executive officer, Tuan Haji Ali Hassan Mohd Hassan (pictured right) said that this was yet another defining milestone in the history of his company.
“We look forward to working closely with Ekuinas and to tap into its expertise to help take us to the next level within the sports retail industry. We are confident that our partnership will prove mutually rewarding for both entities, as well as provide Malaysians another source of pride as we grow the Al-Ikhsan and AL Sports brands beyond our shores,” Tuan Haji Ali said.
This acquisition is Ekuinas’ first investment for 2016 and in the sports retail segment. Together with an investment in the manufacturing sector under the Outsourced Programme for RM12 million, Ekuinas has invested in a total of 36 companies under direct and outsourced investments since its establishment in 2009. The Company recently announced its results for the financial year ended 31 December 2015, which saw Ekuinas maintaining its Internal Rate of Return (IRR) above the minimum target of 12% per annum for the sixth year running. Ekuinas Direct (Tranche I) Fund recorded a Gross Portfolio Return of RM591.3 million, at a gross IRR of 14.8% whilst its second fund, Ekuinas Direct (Tranche II) Fund posted a Gross Portfolio Return of RM133.3 million at a gross IRR of 13.0%.