Masterskill aborts RM75m property disposal

KUALA LUMPUR: Masterskill Education Group Bhd has aborted its plan to dispose of its Cheras, Kuching, Kota Kinabalu and Johor campuses, after its board was unable to mutually agree on a revised sale consideration based on the property valuation done by independent valuer Cheston International (KL) Sdn Bhd.

Cheston had ascribed an indicative market value of RM110.4 million for the properties, higher than the initial indicative sale consideration of RM75 million offered by the group’s major shareholder Siva Kumar M Jeyapalan.

It is understood that the deal was aborted due to the valuation being too high. In a Bursa Malaysia filing yesterday, Masterskill said it would seek alternatives to implementing its asset light strategy and raising funds for the group.

Siva Kumar first proposed to make an offer for the four campuses on Nov 6, and then lease them back to the group for 10 years, with the option to extend for another five years.

Following that, on Nov 10, education provider SMRT Holdings Bhd and Creador II LLC announced the proposed acquisition of a 32.9% equity interest in Masterskill belonging to Siva Kumar at 60 sen apiece.
The acquisition will be done together with Rahpia Ltd, a wholly-owned subsidiary of Creador. SMRT will take up a maximum of 23% interest in Masterskill while Rahpia will acquire the remainder of Siva Kumar’s stake.

Rahpia is an existing shareholder of Masterskill with a 16.26% stake while Creador founder Brahmal Vasudevan holds a 6.15% stake in SMRT. The stock shed 0.5 sen or 0.8% to close at 59.5 sen yesterday, with a market capitalisation of RM223.77 million.

This article first appeared in The Edge Financial Daily, on December 17, 2014.

Masterskill CEO buys 7m shares, ups total stake to 23.81%

KUALA LUMPUR (March 23): Masterskill Education Group Bhd (MEGB) group chief executive officer Datuk Seri Edmund Santhara bought 7.0 million shares on Thursday.

A filing with Bursa Malaysia showed he acquired the shares at RM1.10 each. The acquisition raised his total shareholding in the education-based company to 23.81% or 97.6 million shares.

Of the 23.82%, his direct stake in MEGB is 48 million shares or 11.71% while his indirect stake is 49.60 million shares or 12.1%.



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CIMB Research has technical buy on MEGB at RM1.06

KUALA LUMPUR (March 12): CIMB Equities Research has a technical buy on Masterskill Education Group at RM1.06 at which it is trading at a FY13 price-to-earnings of 9.6 times and price-to-book value of 0.8 times.

It said on Monday that MEGB, after it had violated the triangle support, the share price fell to a low of 97 sen before bouncing to current levels.

“We think that the 97 sen low would likely be its near term support. Hence, risk takers may consider taking some position here,” it said.

CIMB Research said the MACD histogram bars are falling at a slower pace, suggesting that buying momentum is slowly picking up. RSI has also recovered from the oversold territory.

“The immediate target to beat is RM1.16. Once this level is taken out, the bulls will likely charge towards RM1.24 and RM1.38,” it said.



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CIMB Research maintains technical sell on Masterskill Education Group at RM1.04

KUALA LUMPUR (Feb 28): CIMB Equities Research is maintaining its technical sell call on Masterskill Education Group Bhd (MEGB) at RM1.04 at which it is trading at a FY13 price-to-earnings of 6.9 times and price-to-book value of 0.8 times.

It said on Tuesday that since its Sell call on Feb 10, prices have now fallen below the RM1.08 support. The breakdown of its triangle last week suggests that the next leg of selling is already underway.

“There is no change in its technical outlook for the near term as the near term trend remains down. Both its indicators also support the bearish near term trend. Nevertheless, there is potential for a bullish divergence forming but we will write on these pages if the longer term trend has changed,” it said.

CIMB Research said for now, the stock remains a sell targeting 90 sen to 95 sen, where a cluster of Fibonacci targets lie. A break above the apex of the triangle at RM1.15 would likely suggest that the longer term trend is about to change.



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CIMB Research has technical sell on Masterskill at RM1.22

KUALA LUMPUR (Feb 10): CIMB Equities Research has a technical sell on Masterskill Education Group at RM1.22, at which it is trading at a FY13 price-to-earnings of 8.1 times and price-to-book value of 1.0 times.

It said on Friday Masterskill is consolidating in a triangle pattern, which is usually seen a continuation pattern.

“As the previous trend was down, we expect one more push towards RM1.15 and RM1.08 supports in the near term.

“Unless prices swing back above the RM1.26 level, we would rather stick with the bear’s camp. Hence, unload on strength looks like a good option here,” it said.

CIMB Research said the technical landscape remains lethargic. MACD signal line is flat, hovering near the zero level while RSI is slightly above the 50pts mark.



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Masterskill up 2.7pc on stake sale report

Masterskill Education Group Bhd, Malaysia’s largest operator of private nursing colleges, rose the most this month after the Star newspaper said its key shareholders may sell a stake to a strategic investor.

The stock gain 2.7 per cent to RM1.13 at 9:12 a.m. local time, set for its biggest increase since Nov 30. -- Bloomberg



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HDBSVR sees KLCI trading with downward bias

KUALA LUMPUR (Dec 19): Hwang DBS Vickers Research expects the FBM KLCI likely trade with a downward bias on Monday, moving towards its immediate support level of 1,445.

It said sentiment would be dampened after the mixed close on Wall Street last Friday as Fitch Ratings lowered France’s credit outlook. The international rating agency also put Spain, Italy, Belgium, Slovenia, Ireland and Cyprus on a “Rating Watch Negative” review, which is expected to be completed by the end of January.

HDBSVR said at the time of writing, Dow Jones Industrial Average (DJIA) Index Futures is traded 23 index-points lower than its last closing.

“In terms of share price actions for the day, we could see added interest in UEM Land, which will be included in the FBM KLCI Index today,” it said.

The research house said Masterskill Education Group could see some trading interest after media reports claiming that a controlling block of shares may be up for sale with at least two parties interested.

Also in focus could be MMC Corp, which is said to be undertaking due diligence exercise in view of splashing out up to RM1 billion to take control of Keretapi Tanah Melayu Bhd’s operations.



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Masterskill 3QFY11 continues to disappoint

Masterskill Education Group Bhd (Nov 21, RM1.16)
Maintain fully valued at RM1.20 with revised target price of 70 sen (from RM1.20): Masterskill’s 3QFY11 net profit plunged 78.8% year-on-year (y-o-y) and 52.1% quarter-on-quarter (q-o-q) to RM5.5 million. This brings 9MFY11 net profit to RM39.7 million or 52.5% of our initial full-year estimate, way below expectation. Revenue for 3QFY11shrank to RM61.2 million (-24.1% y-o-y, -7% q-o-q) on the back of weak new student intake (1,800 year-to-date, below the circa 3,000 students that graduated in September 2011). This, coupled with rising overhead costs (attributable to teaching staff, depreciation and other administration costs), dragged down operating margin to 15.9% (3QFY10: 40.7%, 2QFY11: 15.4%).

Masterskill has been struggling to draw in more new students due to: (i) a more competitive health science education landscape; (ii) a shift in industry trend whereby fewer students are pursuing diploma courses in private education institutions; (iii) lower National Higher Education Fund (PTPTN) funding limit; and (iv) higher minimum entry requirement for nursing programmes.

Following the disappointing 3QFY11, we have cut FY11F to FY13F earnings by 38% to 43% as we factor in lower new student intakes of 2,100 (from 4,000) in FY11F and 4,500 (from 5,100) in FY12F (when there could be a higher number of new students for its degree programmes and new courses as Masterskill embarks on fresh initiatives to diversify its income profile).

We have also trimmed our dividend payout assumption to 40% (from 50%), which translates to dividend per share of 4.4 sen (of which 4.2 sen has just been declared) or a prospective 3.7% net yield for FY11F. Masterskill may want to conserve cash for its capital expenditure requirements amid a weak earnings outlook. Maintain “fully valued” with a revised target price of 70 sen (from RM1.20) based on nine times FY12F earnings per share with support from its existing net cash balance of RM121.6 million, or 30 sen per share. — HwangDBS Vickers Research, Nov 21


This article appeared in The Edge Financial Daily, November 22, 2011.



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Market volatility to continue

KUALA LUMPUR: The markets are expected to be volatile in the week ahead, as the news flow from the eurozone continues to swing like a pendulum. On the minds of investors is whether the governments in Europe and the US can resolve the growing debt problems.

Investors are unsure whether the European Central Bank will find a way to act as a lender of last resort in the manner of the US Federal Reserve.

In Malaysia, while the economy grew at a faster pace of 5.8% year-on-year in 3Q from 4.3% in 2Q, there were concerns over the headwinds in 4Q12. RHB Research Institute said it tweaked its real GDP growth estimate for 2011 upwards to 5% from 4.5%.

“However, we are keeping our 2012 forecast unchanged and expect economic growth to weaken to 3.6%, given that the eurozone’s sovereign debt crisis is still lingering and the risk of it worsening remains high, and on the back of a slow US economic growth,” it said.

Affin Investment Bank’s head of retail research Dr Nazri Khan said 3Q GDP results showed the existing financial conditions in the country remain conducive for growth.

“Our view is that the government and Bank Negara Malaysia should continue with the current environment of low interest rates, ensure ample liquidity in the financial markets and easy credit accessibility, to bolster domestic demand,” he said.

Nazri said key support for future GDP growth would definitely be private investment.

“As the projects under the ETP [Economic Transformation Programme] kick off to higher gear, we expect stronger private investment and other side effects, such as bond and equity income growth, to bring more contribution to the economy,” he said.

As for equities, Nazri believes the FBM KLCI is now ripe for a pullback towards a lower range of 1,450 to the 1,430 support level.

“We believe the global equity market will be affected by the widening European debt crisis following disappointing French and Spanish bond auctions and downgrade warnings from ratings agency on the US’ large banks,” he said.

RHB Research, in its market strategy, said the volatile news flow would continue as long as there are no firm and detailed solutions, forestalling the equities market correction it had been anticipating.

“We continue to advise caution,” it said, pointing out that its top picks are companies with stable cash flow and those with above-market dividends.

Its stocks which offered more trading flavour and near-term trends were UEM Land Bhd, Top Glove Corp Bhd and WTK Holdings Bhd.

It said UEM Land is expected to benefit as oil and gas projects in Johor will continue to raise land values and provide catalysts for the share price.

It also favoured Top Glove as lower auto industry demand — due to Thailand’s severe floods — could impact the latex price in the near term.

“We see potential for the stock to move higher, although we recognise its premium valuations relative to its sector peers,” it said.

RHB Research added that WTK would benefit from a rise in timber prices in 2012 as Japan’s post-tsunami construction picks up. It explained that WTK is the purest timber play for Japan and the recent share price pullback saw it trading at relatively inexpensive valuations against the less liquid peers.

Other stocks to watch include IOI Corp Bhd, Masterskill Education Group Bhd, Affin Holdings Bhd and Benalec Holdings Bhd.

IOI’s net profit for 1QFY12 ended Sept 30, 2011, fell 48.2% to RM258.09 million from RM498.13 million a year ago, due mainly to unrealised translation loss on foreign currency denominated borrowings of RM271.7million. The loss was higher than analysts’ estimates.

Masterskill’s net profit for 3QFY11 ended Sept 30 fell 78.8% to RM5.55 million from RM26.18 million a year ago mainly due to lower student enrolment and higher overheads.

Affin reported an improvement in its earnings, which rose 17.5% to RM135.19 million in 3QFY11 ended Sept 30 from RM115.01 million a year ago, boosted by higher writebacks and higher Islamic banking income. It declared an interim dividend of 12 sen per share.

The Edge weekly reported that Benalec’s recent foray into land reclamation at the oil and gas hub in Johor has raised some eyebrows.

If all goes well, the project will boost the total outstanding gross development value of its projects from about RM1.5 billion to over RM15 billion.


This article appeared in The Edge Financial Daily, November 21, 2011.



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Masterskill slips in early trade on weaker 3Q earnings

KUALA LUMPUR (Nov 21): Masterskill Education Group Bhd (MEGB) shares fell in early trade on Monday after its net profit for the third quarter ended Sept 30, 2011 fell 78.8% to RM5.55 million from RM26.18 million a year earlier, due mainly to lower student enrolment and higher overheads.

At 9.30am, MEGB fell four sen to RM1.16 with 429,100 shares traded.

MEGB said on Nov 18 that its revenue for the quarter fell to RM61.19 million from RM80.68 million in 2010.

Earnings per share fell to 1.00 sen from 9.00 sen a year earlier, while net assets per share was RM1.31.

For the nine months ended Sept 30, MEGB’s net profit fell to RM39.72 million from RM75.29 million in 2010, on the back of a dip in revenue to RM200.67 million from RM234.83 million.

RHB Research maintained its Underperform call on Masterskill with an unchanged fair value of RM1.05, based on a target FY12 PER of 8.5x.

The research house MEGB’s lower earnings trend will continue into 1H12 as MEGB continues to incur higher operating costs in line with its expansion.

“Although MEGB should not be affected by the recent proposed changes to the PTPTN loans, with around 96% students taking the loans, MEGB is susceptible to future changes in the loans.

“Furthermore, MEGB’s high foreign shareholding of 46.4% continues to expose the company to volatile portfolio flows,” it said in a note Nov 21.



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RHB Research maintains Underperform on Masterskill, unch FV RM1.05

KUALA LUMPUR (Nov 21): RHB Research Institute is maintaining its Underperform call on Masterskill Education Group Bhd.

It said on Monday that its fair value is unchanged at RM1.05, based on a target FY12 PER of 8.5 times.

“We believe that Masterskill’s lower earnings trend will continue into 1H12 as Masterskill continues to incur higher operating costs in line with its expansion,” it said.

RHB Research said although Masterskill should not be affected by the recent proposed changes to the PTPTN loans, with around 96% students taking the loans, Masterskill is susceptible to future changes in the loans.

“Furthermore, Masterskill’s high foreign shareholding of 46.4% continues to expose the company to volatile portfolio flows,” it said.



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Masterskill falls after Q3 profit tumbles

Masterskill Education Group Bhd, Malaysia’s largest operator of private nursing colleges, declined to the lowest level in a month in Kuala Lumpur trading after its third-quarter net income tumbled 79 percent to RM5.5 million.

The stock lost 3.3 percent to RM1.16 at 9:13 a.m. local time, set for its lowest close since Oct. 21. -- Bloomberg



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HDBSVR sees market recouping some losses

KUALA LUMPUR (Nov 21): Hwang DBS Vickers Research said the FBM KLCI may recoup some of its 24.47 index-points (or 1.7%) lost last week.

As for Monday’s trading, it said the KLCI’s immediate resistance barrier stands at 1,475.

Last Friday, key US equity indices ended mixed in last Friday’s trading between -0.6% and +0.2%. This was mainly led by sell-down in the TECHNOLOGY [] and energy stocks as investors remain skeptical on the progress of an accelerating economy in the home country.

HDBSVR said on the domestic front, the stocks that would attract some focus includes Masterskill which has reported a set of disappointing 3Q11 results.

Another stock to watch is KL Kepong which has approved a RM700 million plan to expand its rubber and palm oil operations in Malaysia. It also plans to expand its fatty alcohol plant and develop R&D capabilities for oleochemicals technology and the Vitamin E market.

As for Bandar Raya Development, HDBSVR said it may be taken private by its major shareholders.



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Stocks to watch: IOI Corp, MEGB, Affin, Benalec, Texchem

KUALA LUMPUR (Nov 19): Sentiment is expected to stay cautious in the week ahead as investors worry about whether the governments in Europe and the US could resolve the growing debt problems.

Reuters said a major question has been whether the European Central Bank will find a way to act as a lender of last resort in the manner of the U.S. Federal Reserve. Speculation has grown the ECB could lend money to the International Monetary Fund to bail out some euro zone members.

The Dow Jones industrial average gained 25.43 points, or 0.22%, to 11,796.16. The S&P 500 dipped 0.48 point, or 0.04%, to 1,215.65. The Nasdaq Composite lost 15.49 points, or 0.60%, to 2,572.50. However, for the week, the Dow fell 2.9%, the S&P dropped 3.8% and the Nasdaq lost 4%.

As for Malaysia, while third quarter GDP expanded at a stronger pace of 5.8% on-year from a revised 4.3% in the second quarter, there were gnawing concerns about the headwinds in the fourth quarter and 2012.

RHB Research Institute said it tweaked its real GDP growth estimate for 2011 upwards to 5% from 4.5%.

“However, we are keeping our 2012 forecast unchanged and expect the economic growth to weaken to 3.6%, given that Eurozone’s sovereign debt crisis is still lingering and risk of it worsening remains high, and on the back of a slow US economic growth,” it said.

Stocks to watch on Monday include IOI CORPORATION BHD [], Masterskill Education Group Bhd (MEGB), AFFIN HOLDINGS BHD [], Benalec Holdings Bhd and TEXCHEM RESOURCES BHD [].

IOI’s net profit for the first quarter ended Sept 30, 2011 fell 48.2% to RM258.09 million from RM498.13 million a year ago, due mainly to unrealised translation loss on foreign currency denominated borrowings of RM271.7million. The loss was higher than analysts’ estimates. The PLANTATION [] company’s revenue for the quarter rose 17.9% to RM4.15 billion from RM3.52 billion a year ago.

Meanwhile, MEGB’s net profit for the third quarter ended Sept 30, 2011 fell 78.8% to RM5.55 million from RM26.18 million a year ago. It attributed the poorer financial performance mainly to lower student enrolment and higher overheads. MEGB’s revenue for the quarter fell to RM61.19 million from RM80.68 million in 2010.

For the nine months ended Sept 30, MEGB’s net profit fell 47.2% to RM39.72 million from RM75.29 million in 2010, while its revenue fell 14.5% to RM200.67 million from RM234.83 million.

However, Affin reported an improvement in its earnings, which rose 17.5% to RM135.19 million in the third quarter ended Sept 30, 2011 from RM115.01 million a year ago, boosted by higher write-backs and higher Islamic banking income.

Its revenue increased 13.7% to RM680.12 million from RM597.82 million a year ago while earnings per share were 9.05 sen compared with 7.70 sen. It declared an interim dividend of 12 sen a share.

The Edge weekly reported that Benalec’s recent foray into land reclamation works at the oil and gas hub in Johor has raised some eyebrows. But if all goes well, the project will boost the total outstanding gross development value of its projects from about RM1.5 billion to over RM15 billion, said the report.

Another company to watch is Texchem on expectations it may unlocking value of some of its assets.

RAM Rating Services Bhd said the corporate exercise by Texchem would generate significant net cash inflows that will help to considerably strengthen its balance sheet and liquidity position.

However, the ratings agency was also concerned about its financial health. It downgraded the long-term rating of Texchem’s RM100 million debt notes from A3 to BBB1 with a negative outlook on rising concerns about the company's weakening financial performance.

RAM Ratings said the downgrading of Texchem’s long-term rating was based on its weakened business and financial performance.



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Masterskill 3Q net profit slumps 78.8% to RM5.55m on lower enrolment

KUALA LUMPUR (Nov 18): Masterskill Education Group Bhd (MEGB) net profit for the third quarter ended Sept 30, 2011 fell 78.8% to RM5.55 million from RM26.18 million a year earlier, due mainly to lower student enrolment and higher overheads.

MEGB said that its revenue for the quarter fell to RM61.19 million from RM80.68 million in 2010.

Earnings per share fell to 1.00 sen from 9.00 sen a year earlier, while net assets per share was RM1.31.

For the nine months ended Sept 30, MEGB’s net profit fell to RM39.72 million from RM75.29 million in 2010, on the back of a dip in revenue to RM200.67 million from RM234.83 million.

Reviewing its performance, MEGB said the lower student enrolment was due to the Ministry of Higher Education’s decision to align the academic term for local institutions of higher learning with that of universities abroad by moving the intake date to September from June/July.

It also said the changes toward the PTPTN loan scheme effective June 1, 2011 had impacted its revenue especially for the new student intake.

MEGB said another factor that had affected its student enrolment was the increase in the minimum entry requirement for the diploma in nursing programme from three credits to five credits at the SPM level.

The education group also said that its profits were impacted by higher operating overheads due to its growth and on-going expansion plans.

On its prospects, MEGB said it maintained profitability in 3Q with cash in hand of RM178.4 million despite a challenging market environment.

“As a result, we continue to believe that the group is well positioned for growth going forward,” it said.

MEGB said that moving forward, it would continue to pursue growth in the domestic and international markets, adding that it had received approval to conduct franchising.

“Overall, MEGB remains fundamentally strong and well-positioned to pursue growth opportunities and forge ahead with our long-term expansion plans.

“The directors are confident of achieving satisfactory results for the full financial year of 2011 given prevailing market conditions,” it said.



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Masterskill says won’t be affected by PTPTN proposal

KUALA LUMPUR: Masterskill Education Group Bhd says it will not be affected by the National Higher Education Fund Corp’s (PTPTN) proposal to restrict loans if it is approved.

“Masterskill University College of Health Sciences is not involved and thus we will not be affected by the PTPTN move to stop providing loans for the expenses of students,” the group said in an email reply to The Edge Financial Daily.

“Masterskill students are only given RM45,000 [in loans by] PTPTN, and this only covers the tuition fees.

“As such, we will not be affected by this proposal,” said the group, adding that the proposal would affect universities or colleges that receive loans of RM60,000 from PTPTN.

The statement was made after speculation the education group will face headwinds if the proposal is approved, especially since its enrolment is already showing signs of decline.


CIMB Research, in a report released earlier this week, has cut its FY11 to FY13 student numbers forecast for Masterskill by 1% to 5% to between 17,000 and 19,000.

It expects student growth to be 6% to 7% (compared with 8% to 9% previously) for the next three years.


This article appeared in The Edge Financial Daily, November 10, 2011.

No end to Masterskill’s PTPTN worries

KUALA LUMPUR: Masterskill Education Group Bhd may see more woes ahead. The group was dealt another setback when the National Higher Education Fund (PTPTN) proposed to reduce loans for students studying at higher educational institutions.

It was reported over the weekend that PTPTN chairman Datuk Ismail Mohamed Said said the corporation had decided to make the cut as there was a large pool of borrowers and loan defaults. He reportedly said loans will continue to cover education and tuition fees, but not living expenses, and will commence in 2013.

Ismail was later quoted as clarifying that it was a proposal and that the final decision would be made by the government.

Potential cuts in funding or disbursement of PTPTN loans have long been a major worry for Masterskill as about 95% of its students depend on them. These concerns started emerging last year on reports that PTPTN saw a rising number of defaults which could limit future funding for these loans.

The concerns and foreign selling have driven the stock sharply lower since the fourth quarter last year and lately there is renewed buying interest.

Last week, Masterskill’s stock jumped from RM1.29 on Monday and Tuesday to RM1.39 on Wednesday before closing at RM1.36 on Friday on heavy volume.

Masterskill faces prospects of lower enrolment figures as competition for tertiary students heats up.

The increase in investor interest was a result of speculation on the emergence of Siva Kumar s/o M Jeyapalan as a substantial shareholder of the education group after acquiring 41.2 million shares, or a 10.05% stake, on Oct 5. The stock has also fallen sharply from its IPO price of RM3.80 last year.

The renewed interest is despite the fact that analysts have raised concerns about the prospects of lower enrolment numbers as competition to attract tertiary students heats up.

OSK Research reported last week that “new enrolments in the supposedly major student intake period from September to mid-October are likely to have fallen to the tune of a few hundreds”.

If the proposal is accepted, then the change in loan policy could possibly mean lower student intakes in the future for Masterskill, CIMB Research said in its report yesterday.

“PTPTN recently reduced the loan eligibility for healthcare-related courses from RM60,000 to RM45,000, which is lower than Masterskill’s RM52,000 average three-year course fees for diploma in nursing,” said the report. “As the RM45,000 does not include coverage for student expenses, it should not have a revenue impact on the group. But the decision to stop loans on expenses, though not immediate, is likely to dampen student enrolment.”

Leveraging on such sentiment, the research house lowered its price-to-earnings ratio (PER) target for the group to 7.6 times from 8.7 times, with a reduced price target of RM1.46 from RM1.71. It maintained a “neutral” recommendation on the stock.

Even though the report did not strike out a possible mild rebound in student numbers in the fourth quarter, the 2HFY11 earnings are unlikely to surpass that of 1HFY11 “due to the continued impact of a higher lecturer and staff cost”.

The 1HFY11 results were already lower than previously. Revenue was at RM139.47 million, 9.5% lower year-on-year (y-o-y), than the RM154.15 million posted last year. Net profit fell 30.42% y-o-y to RM34.17 million from RM49.11 million.

CIMB Research has cut its FY11 to FY13 student numbers forecast for Masterskill by 1% to 5% to between 17,000 and 19,000. It expects student growth to be 6%-7% (compared with 8%-9% previously) for the next three years.

CIMB also said in the report the recent share price rebound is “not sustainable” and expects the upcoming 3QFY11 to be weaker quarter-on-quarter.

Masterskill’s 3Q financial results are expected to be released next week (Nov 18) and investors will be waiting to know the group’s plans on how to tackle the PTPTN issue and student growth uncertainties.


This article appeared in The Edge Financial Daily, November 9, 2011.

CIMB Research maintains Neutral on Masterskill

KUALA LUMPUR (Nov 8): CIMB Research is maintaining its Neutral outlook on Masterskill Education Group Bhd.

It said on Tuesday that the National Higher Education Fund Corporation’s (PTPTN) decision to stop giving student loans for expenses come 2013 will hit Masterskill’s student intake, which was already at a historical low in July-September 2011.

“Brace for poorer 3Q results. We cut our EPS after revising our assumptions for student numbers. Though we roll over our valuation horizon, our target price falls as we now apply a target P/E of 7.6 times (8.7 times previously), based on an unchanged 40% discount to our revised target market P/E. Maintain NEUTRAL,” it said.

Masterskill shares surge despite downgrade

KUALA LUMPUR: Masterskill Education Group Bhd shares surged on high volume yesterday, even as a research house downgraded the stock and the broader market fell.

Shares of the private nursing and healthcare eduction provider ended the day 10 sen or 7.75% higher to RM1.39 and saw 6.64 million shares traded, almost twice the previous day’s volume. The increase came after the stock stayed stagnant for four days at RM1.29.

Masterskill shares have fared poorly since the the company was listed early last year, due to a combination of worries about government loan funding for students and lower student intakes, as well as heavy selling by two foreign funds. From an IPO price of RM3.80, the stock plummeted to an all-time low of RM1.06 on Oct 3, 2011.

Since then, the stock has made a slow and steady recovery, with some attributing it to the emergence of key investors in the group and others to the fact that the stock has been oversold.

On Oct 5, Siva Kumar s/o M Jeyapalan emerged as a substantial shareholder of the education group after acquiring 41.2 million shares or a 10.05% stake. Its shares closed at RM1.09 that day.

Siva Kumar’s optimism, however, is not shared by OSK Research. It downgraded the stock to “neutral” from “trading buy”.


One of the reasons it gave for the downgrade was the decrease in student intake due to increasing competition from other health education providers.

“Our previous concerns of Masterskill potentially succumbing to heightening competition now seem well founded as our ground checks indicate that new enrolments in the supposedly major student intake period from September to mid-October is likely to have fallen to the tune of ‘a few hundreds’”, it said.

“We attribute this to aggressive marketing by some of Masterskill’s peers as industry players strive to fill places arising from capacity expansion.

“We are revisiting our model and slashing our earnings per share forecasts by 25% for both financial years 2011 and 2012 as we see earnings pressure in the next few quarters as competition intensifies”, the report added.

The research house has revised down its fair value to RM1.30 from RM1.91, some 6.5% lower than yesterday’s closing price.

Masterskill will be releasing its 3QFY11 results in mid-November and OSK Research expects some potential negative surprises. However, yesterday’s rally suggests some investors are taking a different view.


This article appeared in The Edge Financial Daily, November 3, 2011.

MEGB advances despite caution over rising competition

KUALA LUMPUR (Nov 2): Shares of Masterskill Education Group Bhd (MEGB) bucked the overall cautious market sentiment to climb 13 sen to RM1.42 at the midday break on Wednesday.

The FBM KLCI was down 11.08 points to 1,464.56. Turnover was 652.31 million shares valued at RM750.32 million. Losers beat gainers three to one with 470 decliners to 151 advancers and 245 stocks unchanged.

However, OSK Research was cautious about the outlook for MEGB and reduced its recommendation from Trading Buy to Neutral due to rising downside risks to earnings.

The research house said there could be a potential shortfall in the student enrolment. It believed the risks to earnings were likely to sap investors’ sentiment and trading interest in the near term.

“Following our earnings revision, our FV now stands at RM1.30 based on a more conservative 9.0 times FY12 price-to-earnings ratio (from 10 times FY12 PER previously),” it said.

OSK Research was concerned about the possible increasing competition in the healthcare education universe and expected a bumpy ride ahead, especially with its peers ramping up capacity.

“We are also becoming increasingly cautious on the stock maintaining its dividend yield of over 7% given that high capex on the proposed RM150 million Bangi campus is likely to cap payout in the near term,” it said.