HELP International Corp Bhd (Dec 27, RM1.64)
Maintain market perform at RM1.62 with fair value of RM1.80: Net profit for 4QFY11 ended October of RM3.6 million (-44.6% year-on-year [y-o-y], more than 100% quarter-on-quarter [q-o-q]) took FY11 earnings to RM13.1 million, a 31.6% decline y-o-y. This was above our expectations but slightly missed street estimates, coming in at only 91% of consensus. As expected, only a minimal full-year gross dividend per share of two sen was declared, as HELP continues to conserve its cash for the construction of its Subang 2 campus.
Revenue for 4QFY11 was up 18.7% q-o-q, mostly due to the higher student enrolment. Earnings before interest and tax (Ebit) margins improved to 19.5% during the quarter (from 4.6% in 3Q11), as HELP was no longer incurring campus relocation costs that dented earnings in 3Q11. The effective tax rate also declined to 31.9% during the quarter (from 70.1% in 3QFY11).
HELP is guiding for better earnings in FY12 as management expects an improvement in student enrolment and normalised operating costs. The key earnings driver in FY12 will be the full contribution from its Frasers Business Park facility. We expect HELP’s earnings to pick up from 2QFY12 onwards, as major intakes will be held from January to March 2012.
The risks include: (i) further regulatory changes; (ii) lower than expected student numbers; and (iii) a decline in demand for private higher education.
We have revised our revenue forecasts for FY12/FY13 by reducing our estimated fee growth assumption to 4.5% (from 8%) as we believe our previous estimates were too aggressive. However, we have increased our net earnings margins after factoring in a better utilisation rate at the Frasers Business Park branch. Overall, our FY12/FY13 earnings per share estimates are slightly reduced by 1.1% to 1.2% to 14.7 to16.1 sen (from 14.8 to 16.9 sen). We have also introduced our FY14 forecast.
As our FY12 forecast revisions were minor (-1.1%), we maintain our “market perform” call on HELP, with an unchanged fair value of RM1.80. We value HELP at 12 times FY12 earnings, after imputing a two times multiple discount to the market’s estimated price-earnings ratio of 14 times due to the stock’s thin trading volume (12-month average traded volume of 26,000 against SEG International Bhd’s 958,000 and Masterskill Education Group Bhd’s 2.4 million). — RHB Research, Dec 27
This article appeared in The Edge Financial Daily, December 28, 2011.
Maintain market perform at RM1.62 with fair value of RM1.80: Net profit for 4QFY11 ended October of RM3.6 million (-44.6% year-on-year [y-o-y], more than 100% quarter-on-quarter [q-o-q]) took FY11 earnings to RM13.1 million, a 31.6% decline y-o-y. This was above our expectations but slightly missed street estimates, coming in at only 91% of consensus. As expected, only a minimal full-year gross dividend per share of two sen was declared, as HELP continues to conserve its cash for the construction of its Subang 2 campus.
Revenue for 4QFY11 was up 18.7% q-o-q, mostly due to the higher student enrolment. Earnings before interest and tax (Ebit) margins improved to 19.5% during the quarter (from 4.6% in 3Q11), as HELP was no longer incurring campus relocation costs that dented earnings in 3Q11. The effective tax rate also declined to 31.9% during the quarter (from 70.1% in 3QFY11).
HELP is guiding for better earnings in FY12 as management expects an improvement in student enrolment and normalised operating costs. The key earnings driver in FY12 will be the full contribution from its Frasers Business Park facility. We expect HELP’s earnings to pick up from 2QFY12 onwards, as major intakes will be held from January to March 2012.
The risks include: (i) further regulatory changes; (ii) lower than expected student numbers; and (iii) a decline in demand for private higher education.
We have revised our revenue forecasts for FY12/FY13 by reducing our estimated fee growth assumption to 4.5% (from 8%) as we believe our previous estimates were too aggressive. However, we have increased our net earnings margins after factoring in a better utilisation rate at the Frasers Business Park branch. Overall, our FY12/FY13 earnings per share estimates are slightly reduced by 1.1% to 1.2% to 14.7 to16.1 sen (from 14.8 to 16.9 sen). We have also introduced our FY14 forecast.
As our FY12 forecast revisions were minor (-1.1%), we maintain our “market perform” call on HELP, with an unchanged fair value of RM1.80. We value HELP at 12 times FY12 earnings, after imputing a two times multiple discount to the market’s estimated price-earnings ratio of 14 times due to the stock’s thin trading volume (12-month average traded volume of 26,000 against SEG International Bhd’s 958,000 and Masterskill Education Group Bhd’s 2.4 million). — RHB Research, Dec 27
This article appeared in The Edge Financial Daily, December 28, 2011.
