Tuesday, August 30, 2011

Masterskill down further

Tuesday August 30, 2011

By CHOONG EN HAN
han@thestar.com.my

Higher requirements for nursing course affect student intake

KUALA LUMPUR: Masterskill Education Group Bhd (MEGB) took a beating yesterday, with its share price losing 21 sen or 13.7% to close at RM1.32 after reporting a less than stellar second-quarter results last Friday. The stock has been on continuous downtrend since it listed at RM3.80 in May 2010.

Bursa Malaysia closed after the morning session yesterday owing to the Hari Raya and National Day holidays.

Research houses also downgraded the prospects of Masterskill Education Group Bhd, following its weak second-quarter results, which were attributed to lower student enrolments arising from the higher nursing minimum entry requirements and the change in the timing for public universities' intake.

In a note yesterday, CIMB Research said that it was taken aback by the impact of the higher entry requirements for the nursing diploma on net student intake from Janunary to June 2011.

“Earlier this year, the Malaysian Nursing Board raised the entry requirements from three credits to five credits, which affected student numbers slightly in the first quarter of 2011,” it said, adding that second -quarter student numbers were expected to recover but the student intake trend was weaker during MEGB's enrolment drive in the past three to four months.

It said that in the medium term, student intake prospects were unexciting and margins would be under pressure.

The National Higher Education Fund Corp's recent loan scheme revision was viewed as negative given that Masterskill's average diploma course fee is RM52,000, and the new policy is enforced industry-wide and is expected to be more detrimental to small colleges that are highly dependent on nursing diploma students.

For the health sciences segment, loan allocation per student for all health science-related diploma courses is reduced from RM60,000 to RM45,000 and applies to all new and existing courses for all campuses and college locations.

“Student growth for the next two to three years does not look as exciting as before. We previously assumed a 10%-13% annual student population growth for financial year 2011 to 2013. This no longer looks achievable. We are now looking at growth of 8%-7% annually,” it said.

CIMB Research downgraded the group to “neutral” with a target price of RM1.71 from RM3.48 previously, saying that changes in industry-wide policies since Masterskill's listing have buffeted the market leader.

It said prospects for strong growth of student numbers for its existing campuses were unexciting although it still held a long-term positive view on the group's expansion into non-healthcare courses, new university campus and move into degree and medical degree courses.

To be noted is the fact that CIMB Investment Bank Bhd was the principal adviser, retail underwriter as well as the joint global co-ordinator and joint bookrunners together with Goldman Sachs for the group's initial public offering.

Meanwhile, HwangDBS Vickers Research lowered its new student intake assumptions to 4,000 from 6,500 in 2011, 5,100 from 7,300 in 2012 and 5,700 from 8,100 in 2013, with its year-to-date enrolment rate suggesting MEGB could struggle to meet its expectations which were already lowered amid tough business environment.

The research house had also downgraded the stock to “fully valued” from “buy” previously with a lower target price of RM1.20 versus RM2.50 previously.

News had also resurfaced that private equity firm Crescent Point Investment Holdings Ltd, founded by former Morgan Stanley bankers, may sell its 21.5% stake in MEGB.

In 2009, it was speculated that the firm was looking to divest its 65% stake then in South-East Asia's largest nursing and healthcare college operator for a reported value of between US$200mil and US$250mil. However, the report was refuted by the Singapore-based firm's partner and managing director Richard Scanlon then.

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