The Temasek Holdings-controlled investor’s USD 74m equity commitment will underpin organic and inorganic expansion that may ultimately see the recently delisted Hi-P International go public again

Hi-P International is the fourth investment from a SGD 1bn (USD 744m) fund that helps Singapore-based companies expand overseas. It differs from the rest of the portfolio: older, larger, rooted in traditional advanced manufacturing competencies. But 65 Equity Partners, the investment firm responsible for the fund, sees plenty of businesses in a similar situation.

“As many experienced and successful founders consider future plans for their businesses over the next decade or so, private equity often provides a convenient exit solution,” said Francis Woo, chief corporate officer and a managing director at 65 Equity, which is controlled by Temasek Holdings.

“We take a different approach, preferring to invest as a minority shareholder alongside founders providing them with the necessary support to expand and transform their businesses for the next chapter.”

Hi-P might otherwise have been a perfect target for a private equity buyout. Founded in 1980 and run by an octogenarian executive chairman, Hsiao Tung Yao, who had expanded the business overseas, it listed in Singapore in 2014. However, the stock seldom traded above SGD 1.50, and Yao felt the business was undervalued.

A DBS research paper, published at the end of March 2020 when Hi-P was priced at SGD 0.85, put the enterprise value-to-earnings multiple at 2.7x. Yao acted in December, submitting a take-private offer that valued the company at 7.3x. The price – a 23% premium to the volume-weighted average price over the prior month – translated into a market capitalization of SGD 1.6bn.

Plenty of advanced manufacturing players have embarked on this journey in conjunction with PE partners. Yao did it on his own. He told Singapore media in early 2023 that the goal was to put Hi-P on track to achieve sales of SGD 10bn by 2029 – it generated SGD 1.37bn in 2019 – and relist in late 2024 or early 2025. A dual listing in Singapore and Hong Kong or the US was mentioned.

65 Equity has agreed to support this growth, paying SGD 100m for a minority stake in the business.

Global ambitions

Hi-P provides contract manufacturing and assembly, testing, and packaging services to consumer and e-commerce companies and electronic component suppliers. Customers include Apple, Amazon, Colgate-Palmolive, Dyson, Logitech, Meta, Motorola Solutions, Procter & Gamble, and Tesla. It has factories in China and Thailand and sales and engineering offices in the US, Europe, and Asia.

Like many companies with supply chain exposure to China, Hi-P is diversifying, with manufacturing capabilities added in the Philippines, Malaysia, Vietnam, and India. As this expansion continues, M&A is expected to be part of the plan.

“These are operating companies with skillsets in different areas, often without in-house M&A capabilities. We can help with the assessment to determine whether a potential acquisition makes sense,” said Woo.

“We also have our Rolodex and global network, enabling us to assist in strengthening corporate governance by identifying experienced board and senior management, sourcing for investment opportunities, or helping to prepare for a listing down the road.”

65 Equity has two strategies: a SGD 1.5bn anchor fund that invests in companies that want to list in Singapore and the local enterprise fund that supports outbound expansion. The latter vehicle – funded by Temasek and Singapore’s Ministry of Trade & Industry – writes cheques of SGD 100m-SGD 150m, focusing on healthcare, industrials, business services, and consumer opportunities.

The other three portfolio companies – all investments made in the past two years – are oncology and cardiology player OncoCare Medical and Novena Heart Centre, corporate services provider BoardRoom, and precision manufacturer TDConnex. BoardRoom and TDConnex were carved out from GK Goh Holdings and Tongda Group, which trade in Singapore and Hong Kong, respectively.

Each one featured a private equity partner: Templewater, Tower Capital, and Novo Tellus Capital Partners. (65 Equity is responsible for Temasek’s GP stakes in Tower and Novo Tellus.)

With projected revenue of SGD 2bn in 2024 – up from SGD 1.6bn in 2021, the year the privatisation was finalised – Hi-P is comfortably the biggest of the four. But Woo still sees considerable upside. “The company already has a large enviable position in the Singapore market, and we look forward to supporting their further growth ahead of a potential IPO,” he said.