Issue 45

Budget 2019: Malaysia to set up $480m co-investment
fund targeting new growth areas

In a move seen to significantly impact the country’s venture capital and private equity ecosystem, the Malaysian government has announced that it will provide up to RM2 billion ($480 million) in matching funds to co-invest with PE and VC players, targeting investments in strategic sectors and new growth areas. 

The Mahathir-led government’s inaugural budget, tabled by Malaysian finance minister Lim Guan Eng on November 2, also announced that all state-linked venture capital funds – Malaysia Technology Development Corporation, Malaysia Debt Ventures Bhd, Malaysia Venture Capital Management Bhd (MAVCAP) and Cradle Fund Sdn Bhd – would be streamlined and made more efficient in delivering capital to companies in various stages of financing needs. 

“To ensure that the funds are accessible to those who are most likely to succeed, the funding disbursements will be tied to the companies’ ability to secure matching funds from the private sector,” Lim said in his Budget presentation. 

In his speech, Lim also emphasised that to encourage successful entrepreneurship, the private sector must take a greater role in spearheading economic growth. Among other decisions in the alternative investment space, the government said, it will allow the private sector to engage in a new form of peer-to-peer lending scheme to enable home buyers to purchase properties through a “crowdfunding model.” 

The property crowdfunding model will be regulated by the Securities Commission Malaysia (SC) and would likely be the world’s first such scheme, scheduled to be launched in the first quarter of 2019. The government is also looking to establish a RM50 million ($12 million) co-investment fund (CIF) to co-invest with the private sector through alternative financing platforms such as equity crowdfunding (ECF) platforms and P2P platforms. 

To date, a total of RM170 million ($40.9 million) have been raised for 450 companies across 10,000 investors via ECF platforms. The Malaysian Digital Economy Corporation (MDEC) has received an allocation of RM10 million ($2.4 million) to develop and promote esports. 

In response to the Budget decisions, Malaysia sovereign wealth fund Khazanah Nasional Bhd managing director Shahril Ridza Ridzuan said,  “We welcome Budget 2019’s 12 strategies which cover a wide range of measures that cumulatively look to drive Malaysia towards a path of long-term inclusive and sustainable growth. 

Khazanah and our investee companies look forward to continue playing our part in delivering the national development measures in Budget 2019, with particular emphasis on the aerospace, creative and media industries, as well as heritage conservation.” 

Commenting on the capital market measures tabled in the Budget, the SC said technology has encouraged product innovation and created new ways and means of doing business in age of digital disruption. “The introduction of property crowdfunding platforms, which will be regulated by the SC under a crowdfunding framework, will provide alternative financing options to first-time home buyers and give investors exposure to the property sector through small investment amounts,” it said. 

It added that it will put in place a regulatory framework to regulate digital asset exchanges and initial coin offerings (ICOs) to facilitate a fair and orderly development of this nascent market. These regulations are expected to come into effect in the first quarter of 2019. MDEC noted that esports is an important growth sector in Malaysia where it is estimated that there are 2.4 million esports enthusiasts in the country alone. 

Southeast Asia, the fastest-growing eSports market in the world, has more than 9.5 million eSports enthusiasts; a number that is forecasted to double by 2019. Malaysia is ranked number 21 in global game revenue estimates for 2017 with US$587 million; ahead of Netherlands and Poland. “There’s more to esports than playing games. 

It is a large industry that can potentially provide high-quality jobs for the youth including software developers and engineers, graphic designers and illustrators; and even esports marketing and advertisers. The budget announcement gives legitimacy and empowerment to the youth to pursue their passion for esports and games. 

“We look forward to work closely with the Ministry of Youth and Sports, under the leadership of Syed Saddiq who firmly champions efforts to develop Malaysia as an Asian esports hub,” said the agency. 

While Malaysian pension fund, the Employees Provident Fund (EPF) CEO, Alizakri Alias said: “We recognise that the near-term measures announced in the budget are necessary to stabilise the country’s fiscal situation in order to put us on a solid growth trajectory, but at the same time, we are glad that the long-term well-being of Malaysians, ranging from affordable housing, healthcare, insurance coverage and public transportation, are also being looked into.” 

Budget highlights:
•    Foreign digital service providers will be taxed from Jan 1, 2020. Examples of services include music, video, streaming services and digital ads. Some of the brands listed were Netflix, Spotify and Stream. 

•    An Airport Real Estate Investment Trust (REIT) will be set up and managed by Malaysia Airports Holdings Bhd (MAHB) to obtain up to RM4 billion ($960 million) funding via 30 per cent equity sale. 

•    Japan Bank of International Cooperation is expected to guarantee JPY200 billion (about $1.78 billion) in a special security known as the “Samurai bond” that is scheduled to be issued by the Malaysian government before March 2019. The coupon rate is set at 0.65 per cent. 

•    The Capital Markets and Services (Prescription of Securities) Guidelines will be gazetted in early 2019 to set up a new regulatory framework to approve and monitor Digital Coin and Token Exchanges. 

•    Through the Malaysia Development Bank (BPMB), the government will set up an RM3 billion Industry Digitalisation Transformation Fund with a subsidised interest rate of 2 per cent. The fund aims to accelerate smart technologies adoption such as robotic and artificial intelligence (AI). 

•    Malaysia’s sovereign wealth fund Khazanah Nasional Bhd will work with relevant agencies to develop an 80-acre land in Subang into a world-class aerospace hub.

  From – Deal Street Asia

Malaysia: The Edge Property launches P2P crowdfunding platform FundMyHome

Malaysia-based property portal operator The Edge Property Sdn Bhd, a subsidiary of The Edge Media Group, has launched peer-to-peer (P2P) property crowdfunding platform FundMyHome, it said in a statement on Monday. 

The launch follows the Malaysia Budget presentation last week when the country finance minister said the government would allow the private sector to engage in a new form of P2P lending scheme, regulated by the Securities Commission Malaysia, to enable home buyers to purchase properties through a crowdfunding model.
The new platform, developed and backed by property portal, will feature about 1,000 dwelling units in the first phase of its rollout, all below a price tag of RM500,000 ($120,000). Through the property crowdfunding platform, home buyers could purchase a home by putting down 20 per cent of the property price, and the remaining 80 per cent would be contributed by participating financial institutions including Malayan Banking Bhd (Maybank) and CIMB Group. 

After a commitment period of five years, the home buyer can choose to sell the home, buyout the remaining portion of the property not owned by him or her at market price, or refinance the home either via FundMyHome or a normal bank mortgage. 

The investors, meanwhile, will profit from either regular yields, or increases in the property’s value. According to FundMyHome, this frees up the homebuyer’s funds for other commitments, as there is no monthly repayment as per a conventional mortgage. 

“FundMyHome also democratises home ownership and stimulates the housing industry without any government expenditure or guarantees. Housing is also a critical element of wealth as it operates as a vehicle for household saving,” said The Edge chairman, Tong Kooi Ong. 

The FundMyHome platform was launched by Malaysian Prime Minister Mahathir Mohamad, who said the country’s pension fund, Employees Provident Fund (EPF) and its members, will be allowed to invest in the scheme to reap good returns. 

He said, the government is in support of such crowdfunding schemes, expecting to eventually become a full-fledged online property crowdfunding platform after the Securities Commission Malaysia has released the regulatory framework for P2P financing slated for the first quarter of 2019. 

A report by noted that the portal is still in discussions with the Securities Commission Malaysia and Bank Negara Malaysia to finalise the terms and conditions as well as the framework of FundMyHome. The Edge Property last raised a $4 million investment in June 2017 to expand the portal’s reach and optimise its features.

From – Deal Street Asia

Malaysia’s first airport REIT expected to spur higher private investments
Malaysia’s plan to develop the world’s first-ever airport Real Estate Investment Trust (REIT) is part of the government’s plan to spur higher private sector involvement in the field, said transport minister Anthony Loke. 

Last week, Malaysia finance minister Lim Guang Eng announced, in the Budget 2019, that the government would set up the airport REIT with hopes to raise RM4 billion ($960 million) via a 30 per cent stake sale to private investing firms. 

“The government’s plan, as mentioned previously, is to bring in the private sector to invest to develop airports in the country,” he was quoted as saying by The Edge, adding that more details of the REIT will be released by the finance ministry. 

According to a separate report by The Edge, Malaysia Airports Holdings Bhd (MAHB) is of the view that the formation of the airport REIT is a way for the government to securitise its infrastructure assets. 

MAHB said it will await further direction from the government in order to get a clearer picture on the implementation mechanism of the proposed airport REIT. “In the meantime, we will still continue with the Operating Agreement finalisation discussion with government and the Regulated Asset Base study with the Malaysian Aviation Commission (Mavcom) as a way for us to undertake the capital expenditure needed for the future upgrading and expansion of the airports,” said an MAHB spokesperson. 

The investors of the proposed airport REIT will receive income arising from user fees collected from MAHB which has the concession to operate these airports. Bursa-listed MAHB manages and operates 39 airports in Malaysia and one international airport in Istanbul, Turkey. 

It counts the Malaysian sovereign wealth fund Khazanah Nasional Bhd as its largest shareholder, which holds 33.32 per cent stake in MAHB. 

“This REIT exercise will only be carried out after the new Regulated Asset Base and user fees structure has been negotiated and finalised. Going forward, the airport REIT will have the opportunity to raise funds publicly either by issuing new REIT units or via borrowings in order to fund the improvement and expansion of airports, especially those facing over-capacity. This financial structure will significantly reduce the debt burden of the Government to fund all of these projects on its own, while maintaining MAHB as an asset light operator not bogged down by heavy capital investments and debt. Other projects could also benefit from similar funding and investment structures, such as hospitals, or rail infrastructure,” said Lim. 

From – Deal Street Asia

Singapore-based robo-advisor StashAway launches in Malaysia

Singapore-based robo-advisor StashAway has ventured into its first overseas market by launching its services in Malaysia, becoming the first digital financial advisor in the country. 

In a statement, StashAway said it recently acquired the capital market services licence from the Malaysia Securities Commission to carry out fund management activities. 

“When you think about how 43 per cent of gross financial assets in Malaysia are in bank deposits, it’s clear that current investment options aren’t doing their jobs of enabling Malaysians to build their long-term wealth through intelligent investing. 

“This huge amount of wealth sitting in cash proves that the financial services industry has failed thus far to equip Malaysians with the right investment tools,” said StashAway co-founder and group CEO Michele Ferrario. 

The startup claims that more than 5,000 people have signed up to be on its waitlist. Founded by former Zalora Group CEO Ferrario, former Nomura managing director and global derivatives strategy chief Freddy Lim and German tech engineer Nino Ulsamer in 2016, StashAway positions itself as an alternative to traditional financial advisors. 

It operates on a monthly subscription model, using a robot advisor to aid clients in making investment decisions without the need for a consultant. StashAway has a Capital Market Services License for Retail Fund Management from the Monetary Authority of Singapore. 

It last raised a $5.3-million Series A round to develop and enhance its investment service and technology as well as for regional expansion. To date, the startup has raised $8.4 million across three funding rounds.

From –Deal Street Asia

Singapore’s ONE Championship, partners to invest $50m in eSports venture

Singapore’s mixed martial arts media firm ONE Championship plans to invest up to $50 million together with its partners to create a global eSports series, the company said in an announcement. ONE Championship and Japan’s largest global advertising agency, Dentsu Inc, have forged a joint venture — ONE eSports — in 2019. 

The new venture has already signed partnership deals with Razer and Singtel, among others. The investment by the two companies seeks to turn ONE eSports into “Asia’s largest global eSports Championship Series” that will feature multiple blockbuster game titles across Asia and hold a number of eSports events held alongside ONE Championship martial arts events in 2019. 

ONE Championship said ONE eSports will piggyback its 30-event martial arts championship that will be staged across a number of Asian cities Singapore, Bangkok, Tokyo, Seoul, Jakarta, Shanghai, Beijing, Manila, Kuala Lumpur and Ho Chi Minh City. 

Moreover, ONE eSports will also produce and broadcast dedicated eSports content in the form of live event broadcasts, documentaries, reality shows, weekly magazine shows, highlights, video blogs, and other unique content across its global media broadcast platform in 138 countries. 

“We see a natural crossover between martial arts and gam
ing fans in Asia and an opportunity to bring them together under Asia’s home of millennial live sports,” said ONE Championship chairman and CEO Chatri Sityodtong. 

As ONE eSports’ marketing partner, Japan’s Dentsu will aim to tap Japanese game developers’ interest in eSports expansion across Asia. It said it will also help lead ONE eSports’ efforts to hold events across Japan. 

Meanwhile, Razer will contribute by leveraging its ecosystem of hardware, software, and services to provide eSports technical and organisation know-how, payments platform for ticketing and marketing assistance. 

ONE eSports will also explore working with the Singtel Group in a partnership that will potentially include joint eSports marketing efforts, production and distribution of eSports content through the Singtel Group’s platforms, telco data bundle plans and online and offline payment services through direct carrier billing and telco wallets. 

ONE Championship is the organiser of MMA fights such as Grit and Glory in Jakarta, Unstoppable Dreams in Singapore and Battle for the Heavens in Shanghai. 

It has earlier revealed plans to expand its events, partnership deals and digital offerings. Led by former MMA champion Sityodtong, ONE closed a $166-million Series D round led by Sequoia Capital last month.


From – Deal Street Asia
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