Stock Name: MEGB
Company Name: MASTERSKILL EDUCATION GROUP
Education sector
Downgraded to neutral: We are turning cautious on prospects for the education sector in the coming quarter given rising macroeconomic headwinds; illiquidity of the stocks in the sector; the relatively small market cap of the education stocks (less than RM1 billion); and high foreign shareholdings for HELP (12.5%) and Masterskill (49%), increasing their susceptibility to volatile portfolio flows. ''
We see few re-rating catalysts for the sector over the coming quarter. Previously, the sector was driven by ETP news flow. However, the excitement is now beginning to recede, as reflected in the uninspiring share price performance of the stocks in the sector. Entry point projects (EPP) involving SEGi such as the establishment of the Early Childhood Care and Education (ECCE) hub and the SkillsMalaysia INVITE programme are already under way, while the announcement of the gradual liberalisation of the education sector under the Strategic Reform Initiatives (SRI) is already priced in.
Risks include further regulatory changes; increase in competition; and slowdown in demand for private higher education as consumers could turn cautious on multi-year commitments to course fees.
Across the board, we are cutting our target FY12 PER for the stocks by one to two times, in line with RHBRI's lower target PER of 13 times (from 14 times).
Our previous valuations look overly optimistic given the more bearish macroeconomic outlook. Given our revised fair value estimates, we downgrade our recommendation on HELP to 'underperform' from 'outperform' and Masterskill to 'underperform' from 'market perform', while SEGi remains an 'outperform'.
We are downgrading the sector to 'neutral' from 'overweight', as the market is no longer excited by the news flow on the education sector with few potential re-rating catalysts for the sector in the immediate term. SEGi is still our pick for the sector due to its good track record and resilience in riding out market uncertainties. SEGi deservedly trades at a premium to its peers at 12.8 times FY12 PER (versus HELP and Masterskill at 12.6 times and 8.8 times respectively), supported by its superior compound annual growth rate (CAGR) of 26.3% (versus HELP and Masterskill at 7.7% and -19.6% respectively). We continue to believe that SEGi is best poised to deliver growth going forward. ' RHB Research, Sept 29
This article appeared in The Edge Financial Daily, September 30, 2011.
Company Name: MASTERSKILL EDUCATION GROUP
| Research House: RHB | Price Call: SELL | Target Price: 1.25 |
Education sector
Downgraded to neutral: We are turning cautious on prospects for the education sector in the coming quarter given rising macroeconomic headwinds; illiquidity of the stocks in the sector; the relatively small market cap of the education stocks (less than RM1 billion); and high foreign shareholdings for HELP (12.5%) and Masterskill (49%), increasing their susceptibility to volatile portfolio flows. ''
We see few re-rating catalysts for the sector over the coming quarter. Previously, the sector was driven by ETP news flow. However, the excitement is now beginning to recede, as reflected in the uninspiring share price performance of the stocks in the sector. Entry point projects (EPP) involving SEGi such as the establishment of the Early Childhood Care and Education (ECCE) hub and the SkillsMalaysia INVITE programme are already under way, while the announcement of the gradual liberalisation of the education sector under the Strategic Reform Initiatives (SRI) is already priced in.
Risks include further regulatory changes; increase in competition; and slowdown in demand for private higher education as consumers could turn cautious on multi-year commitments to course fees.
Across the board, we are cutting our target FY12 PER for the stocks by one to two times, in line with RHBRI's lower target PER of 13 times (from 14 times).
Our previous valuations look overly optimistic given the more bearish macroeconomic outlook. Given our revised fair value estimates, we downgrade our recommendation on HELP to 'underperform' from 'outperform' and Masterskill to 'underperform' from 'market perform', while SEGi remains an 'outperform'.
We are downgrading the sector to 'neutral' from 'overweight', as the market is no longer excited by the news flow on the education sector with few potential re-rating catalysts for the sector in the immediate term. SEGi is still our pick for the sector due to its good track record and resilience in riding out market uncertainties. SEGi deservedly trades at a premium to its peers at 12.8 times FY12 PER (versus HELP and Masterskill at 12.6 times and 8.8 times respectively), supported by its superior compound annual growth rate (CAGR) of 26.3% (versus HELP and Masterskill at 7.7% and -19.6% respectively). We continue to believe that SEGi is best poised to deliver growth going forward. ' RHB Research, Sept 29
This article appeared in The Edge Financial Daily, September 30, 2011.
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