Wednesday, November 9, 2011

No end to Masterskill’s PTPTN worries

Written by Joanne Nayagam   
Wednesday, 09 November 2011 10:59 

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.

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