Investment approach


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Investment approach

  1. 1. Receiving Investment: Approach and Flow Submission  of  Investment  Proposal   a. Business  Plan   b. Financial  summary:  Sale,  P&L,  Capital   Expenditure,  R&D,  Financial  capability     14  days   Review:     Discuss  with   Non  compliance   proponent  to   Within  promoted  areas,  compliance  with   bring  into   policies,  no  threat  to  national  security,   compliance,   not  against  Anti  Money  Laundering  Act.   to  amend  or   withdraw   Investment  test:  ‘net  benefit  to  the  state’   a. Economic  and  socio  economic   impact   b. Technology  advancement   Amendment   c. Implication  on  existing  industry     14  days     Presentation  and  discussion   Experts  may  be  invited  in  the  discussion   Immediate  decision  encouraged   14  days   Formal  letter:  approval  or  conditional   Ensure   approval  subject  to  modification   compliance   a. Allocation  of  suitable  site   Provide   b. Seeking  Investment  approval   assistance     Monitoring   within  3  months   c. Investment  to  commence  within  6     months  from  all  the  relevant   approvals  
  2. 2. Joint Venture/ Collaboration: Approach Submission  of  Investment  /  JV  Proposal   a. Business  Plan:  business,  experience,   technology,  resources   b. Financial  summary:  Sale,  P&L,  Capital   Expenditure,  R&D,  Financial  capability     14  days     Review:     Discuss  with   Non  compliance   proponent  to   Within  promoted  areas,  compliance  with   bring  into   policies,  no  threat  to  national  security,   compliance,   not  against  Anti  Money  Laundering  Act.   to  amend  or   withdraw   Investment  test:  ‘net  benefit  to  the  state’   a. Economic  and  socio  economic   impact   b. Technology  advancement   Amendment   c. Implication  on  existing  industry   d. Compelling  case  for  JV   e. Risk  analysis  &  net  benefit   analysis     14  days     Presentation  and  discussion   Experts  may  be  invited  in  the  discussion   Immediate  decision  encouraged   14  days   Letter:  conditional  approval  subject  to:     Failure  on   due  diligence   a. Successful  due  diligence  by   and  JVA  –   independent  advisors   Rejection,   b. JV  Agreement   Monitoring   termination  
  3. 3. Decision Making Consideration a. There must be due-diligence conducted by independent professionals in order to ensure viability of the partner. b. There must be an agreement before the partnership becomes a reality. c. There must also be a firm commitment on the part of each member. d. Form joint ventures with experienced partners. If the partners do not have approximately equal experience, one can take advantage of the other, which can lead to failure. e. Partners in joint ventures would often be better off participating in small projects as a way to test one another instead of launching into one large enterprise without an adequate feeling-out process. f. Inherent in partner selection is the understanding of potential partners goals such as having complementary strategic objectives. g. Potential partners should also possess complementary skills. Each partner must contribute more than capital to the project, bringing other competencies into the venture. One firm may bring technical skills and another may bring knowledge of the market. There are many skills that a firm can bring into the relationship: managerial expertise, production facilities, or access to limited resources. Skills are most easily meshed when partners have similar, but not identical, products. If both produce an identical product it may be difficult for them to work together. Even if skills are complementary competition may drive them apart and cause the venture to fail. h. While the partners must offer complementary objectives and skills, both partners must believe that they can trust each other and that mutual commitment is a reality.Strategic InvestmentPerak Bio may also make Strategic Investment. Main priorities include focus on focus on thereal return on investment; and a focus on the long term investment strategies in whichinnovation and speedy implementation of new ideas play a major role a. Perak Bio may take the following approach in its investment in investee companies: i. Subscribing to Ordinary shares in certain companies as strategic investment and strategic partners;
  4. 4. ii. Subscribing to Preference Shares in certain companies as strategic investment and with a view of guaranteed income upon the investee company makes profit; iii. Subscribing to loan stock and debentures with strategic exit and guaranteed income. iv. Perak Bio will have to be innovative on the land which used as part of investment. It is proposed that where investors may not afford land price, land is sold on deferred payment basis based on ‘al bai bithaman ajil’ where the land may be charged to the land and paid on deferred payment when the buyer is ready to pay. Inability to pay will revert the land to Perak Bio. This will reduce the risk of Perak Bio being involved in risky and unknown business. In the alternative the land will be considered as part of long term debt instrument issued by Perak Bio to the investor. v. Perak Bio will have to go through an investment approach analysis in order to decide which investment approach it is taking and this will be on a case by case basis. As a rule, if Perak Bio acts as a venture capitalist type of investor, the return of investment has to be calculated properly. New products will take longer to achieve success, on average between 10 – 15 years and this requires different approach to investment and rate of return. Proven products with proven technologies will provide faster return and the expected ROI will be lower. vi. Return of investment depends on the on the stage of investment. For example an early stage investor in the form venture capitalist or business angel would expect a return of between 5 times to 10 times the investment. A late stage investor would normally expect a return of 3 times the investment. This is because early stage investor expects to face higher risk compared to the later stage investor which has its risk reduced. vii. As a State agency, Perak Bio will also have to look into other forms of return, and not just from the perspective of monetary return. ROI for states could mean creation of high skill, high wage jobs; an opportunity to retain the best and brightest students from state universities; or, even the induced economic impact of numerous construction and service jobs associated with a vibrant bioscience industry cluster. viii. In this sense, Perak Bio investment approach has to be balanced between reaching optimum financial return as well socio-economic return to the state of Perak and its people as Perak Bio is not an ordinary private company as it also functions as a government implementing agency.