Stock Name: HELP
Company Name: HELP INTERNATIONAL CORPORATION
Company Name: HELP INTERNATIONAL CORPORATION
| Research House: OSK | Price Call: HOLD | Target Price: 1.55 |
HELP's 1QFY12 resultswere below our expectations. Coreearnings came in at RM1.7m, at <10%of our full-year estimates due to higher personnel costs incurred on staffrecruitment. We are thus revisiting our model and tweaking our EPS forecastslower by some 9.2% for FY12 and 4.1% for FY13. This brings our FV to RM1.55, taking into account its target net cash per share of RM0.46 by Oct2012. Maintain NEUTRAL.
Not making the grade.HELP's 1QFY12 revenue of RM26.9m was down by a marginal 5.6% q-o-q onseasonality but up by a decent 10.5% y-o-y on higher student enrolment. Grossprofit, however, sank more than 34% both y-o-y and q-o-q to RM2.3m due to higher personnel costsincurred in recruiting lecturers with doctorate degrees as part of therequirements for its upgrade to full university status. Correspondingly, bothEBIT and PBT closed lower at RM3.5m and RM3.2m respectively. All in, HELP's 1QFY12 core earnings dwindledto RM1.7m (-53.0% q-o-q; -38.2% y-o-y), exacerbated by a marginal increase ineffective tax rate.
Downgradingforecasts. Given the disappointing results, we revise upwards our opex assumptionsfor both FY12 and FY13, which translate into an earnings cut of some 9.2% forFY12 to RM17.3m, and 4.1% for FY13 to RM18.8m. On the other hand, we are lowering our capex estimates from RM50m to RM20m for FY12 and from RM40m to RM30m for FY13 as we now expect a delay incompleting its proposed flagship Subang 2 campus in Sungai Buloh. From ourrecent conversation with management, there were some changes in the proposedarchitecture, with piling works now expected to start next month. The first phase of the flagship campus, with an estimated capacity of 8k students,is expected to be completed by 2014. Subsequently, HELP's net cash balance isexpected to improve to more than RM60m over the next 2 years.
NEUTRAL. While wecontinue to like HELP's clean books, experienced management and its solidreputation, we remain wary of the potential equity dilution due to funding for itsproposed flagship Subang 2 campus, which we understand may involve an outlay ofRM150m-RM200m. We are also cautious on a possible downside risk toearnings as management ramps up its headcount after obtaining universitystatus. Hence, we maintain our NEUTRAL recommendation for now, with our FV nowat RM1.55, based on an unchanged 9x FY12 PER, plus its target FY12 net cash pershare of RM0.46.
Source: OSK188
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