DYODD 
Malaysia’s state investment company Khazanah Nasional Bhd reiterated that its US$44 million ($61.94 million) investment in Oriental University City Ltd (OUC) in Hebei province, China, was in line with its strategic objectives and financial returns requirements.
Clarifying its announcement on Feb 10, Khazanah said in a statement yesterday the investment in OUC was an extension of its China and Education strategy.
The move would allow Khazanah to achieve the dual objectives of tapping into the expertise of Raffles Education Corporation Ltd (REC) and capitalise on the upside of China’s growing and under-served education sector which was worth US$39 billion annually, it said.
“As with all investment evaluations, the detailed investment evaluation applied in this transaction as a matter of investment policy had looked significantly beyond the historical performance and valuation multiples for 2009 that was quoted in various reports,” it said.
The move would allow Khazanah to achieve the dual objectives of tapping into the expertise of Raffles Education Corporation Ltd (REC) and capitalise on the upside of China’s growing and under-served education sector which was worth US$39 billion annually, it said.
“As with all investment evaluations, the detailed investment evaluation applied in this transaction as a matter of investment policy had looked significantly beyond the historical performance and valuation multiples for 2009 that was quoted in various reports,” it said.
Besides historical performance, it said, the focus of this transaction was to concentrate on a complete set of valuation metrics involving forward-looking financial projections, inherent growth rates, forward price/earnings multiples and a discounted cash flow (DCF) model with an appropriate discount rate that properly reflected the risks involved in a high-growth investment opportunity.
“Suffice to say that the detailed investment evaluation more than satisfies stringent financial criteria that include DCF valuations and internal rate of return (IRR) estimates that are significantly above the risk-adjusted investment hurdle rates, forward earnings multiples that are comparable to industry averages, and compares favourably against inherent growth rates expected in the education sector in China.”
Several parties had expressed concerns over Khazanah’s investment role, strategy and philosophy after its acquisition of a 10% stake in OUC early this month.
“It should be highlighted that the investment has a clear and liquid path for exit if so desired through a planned listing over the medium term,” Khazanah said.
According to reports, OUC focuses on vocational education and provides services to 16 colleges with a total student population of about 36,000.
