Masterskill Said to Raise $238 Million in Malaysia's Biggest IPO in 2010
By Chan Tien Hin and Soraya Permatasari - May 5, 2010 4:51 PM GMT+0800
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Masterskill Education Group Bhd. is raising about 771.4 million ringgit ($238 million) in Malaysia’s biggest initial public offering this year, according to two people with knowledge of the matter.
The country’s largest operator of non-government nursing colleges priced shares on offer to institutions at 3.80 ringgit apiece, the top end of a range marketed to investors, the people said. They requested anonymity as the details are private. The company is selling shares to individuals at 3.50 ringgit each.
The IPO tops JCY International Bhd.’s 703.8 million-ringgit sale in February and may be surpassed this year by offerings from businesses including two units of state oil and gas company Petroliam Nasional Bhd. Masterskill will get 20 percent of the proceeds to fund expansion and the rest will go to shareholders including Chief Executive Officer Edmund Santhara, the people said.
Malaysia’s need for nurses is the “key driver to keep the demand rolling into the industry,” Yeow Yeonzon, an analyst at Kenanga Investment Bank Bhd., wrote in a report yesterday. Masterskill has a “strong track record and for the past three years the sustainable net margin was remarkable at 35 percent to 40 percent,” compared with a peer average of 25 percent, he said.
CIMB Investment Bank Bhd. and Goldman Sachs Group Inc. are managing the IPO. Masterskill CEO Santhara couldn’t immediately be reached for comment. Masterskill is selling 205 million new and existing shares, the people said.
The IPO values Masterskill at about 13 times estimated full-year earnings, one of the people said. Rival Help International Corp. trades at 17 times while Raffles Education Corp. in Singapore trades at 19 times, according to data compiled by Bloomberg.
Companies on the benchmark FTSE Bursa Malaysia KLCI Index trade at an average 15.6 times estimated profit, according to data compiled by Bloomberg.
The company, which owns five campuses with 17,000 students boosted profit 35 percent to 97.4 million ringgit last year, according to a listing prospectus dated April 26.
Masterskill is expanding to help meet a “persistent” shortage of nurses in the country, it said in the prospectus. The firm plans to set up an additional campus in Seri Alam in the southern Johor state this year and buy land for a new campus in the Klang Valley, which will be funded by the proceeds from the share sale.
To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at firstname.lastname@example.org; Soraya Permatasari in Kuala Lumpur at email@example.com
Malaysia's Masterskill IPO priced at 3.80 rgt/share-sources
KUALA LUMPUR | Wed May 5, 2010 2:46am EDT
May 5 (Reuters) - The initial public offering of Malaysia's largest nursing school operator has been priced at 3.80 ringgit a share, at the top end of an indicative range, sources with knowledge of the deal told Reuters on Wednesday.
The IPO will raise 771 million ringgit ($240 million) in Malaysia's biggest initial public offering so far this year.
The company, which provides medical nursing training services through Masterskill University College of Health Sciences, set the indicative price range of its offering of up to 205 million new and existing shares at 3.00-3.80 ringgit each.
CIMB (CIMB.KL) and Goldman Sachs (GS.N) are the joint global coordinators and joint bookrunners of the share offer.
Masterskill officials were not immediately available for comment.
($1=3.212 Malaysian Ringgit)
(Reporting by Soo Ai Peng and Julie Goh; Editing by Niluksi Koswanage)
Masterskill's earnings estimate lowered
Research firms, concerned over the Masterskill Education Group's poor second quarter financial results, have slashed the earnings and new student intake forecast for the next two years.
HwangDBS Vickers Research said it has lowered Masterskill's new student intake target to 4,000 from 6,500 this year, 5,100 from 7,300 in 2012.
The following year's student enrolment has also been reduced to 5,700 vis-a-vis 8,100 initial target, it said.
"This is as the year-to-date enrolment rate suggesting Masterskill can struggle to meet our expectations, already lowered amid the tough business environment.
"This was highlighted in our Aug 5 report which focused on the industry trend of seeing fewer students pursuing diploma courses in private education institutions and tighter PTPTN government funding limit," it said in a research note today.
The research house also slashed the group's earnings forecast for 2011 to 2013 by 25 per cent to 58 per cent.
Meanwhile, the group's pre-tax profit for the second quarter ended June 30, 2011 fell by a hefty RM10.565 million from RM25.723 million in the same quarter last year.
Revenue dwindled to RM65.785 million from RM77.113 million in the same quarter last year, the group said in a filing to Bursa Malaysia.
For the half year, its pre-tax profit declined to RM35.444 million from RM57.777 million last year, while its revenue jumped to RM139.469 million from RM154.153 million in 2010.
In a related development, OSK Research revised downwards the earnings per share estimates by over 30 per cent for both financial year 2011 and 2012 to 18.1 sen and 19.1 sen, respectively.
It said this factored in a marginal decline in both student enrolment and annual tuition fees as well as a slight up tick in operating costs.
Meanwhile, HwangDBS downgraded the company to "fully valued" call, with a lower target price of RM1.20 from RM2.50,
Read more: Masterskill's earnings estimate lowered http://www.btimes.com.my/Current_News/BTIMES/articles/20110829161846/Article/index_html#ixzz1YSmiP8pQ
WEDNESDAY, NOVEMBER 10, 2010
Why MasterSkill share down?
Why MEGB share price down? Masterskill Education Group Bhd (MEGB) share price has fallen so much that it is now well below its IPO price of RM3.50.
The link below may have some details.
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I do not think PTPTN problem is the main reason.
Check on its "changes of shareholding", one of the substantial shareholder is selling heavily these few days. There must be some problem inside. This stock need some time to monitor.
November 10, 2010 8:32 AM
Masterskill plunges on PTPTN woes
Written by Jenny Ng
Tuesday, 09 November 2010 11:58
KUALA LUMPUR: It appears that some of the mega-IPOs of this year are taking turns to sink. After JCY International Bhd’s shares sank in July and August following a labour strike and concerns over the outlook for the hard disk drive industry, it is now the turn of education provider Masterskill Education Group Bhd.
Masterskill, which offers nursing courses and allied health sciences education programmes, was listed in May this year in an exercise that raised some RM779 million at its IPO price of RM3.80 per share.
Its shares have fallen steadily after hitting an all-time high of RM4.30 in late July. The selling pressure accelerated sharply over the past week.
Last Thursday, before the Deepavali holiday, Masterskill’s stock opened at RM2.72 and fell 15.1% to touch RM2.31 before closing at RM2.40. A total 5.06 million shares were traded.
The sell-down continued yesterday, with the stock hitting a new intra-day all-time low of RM2.25 in active trade with 4.2 million shares exchanging hands. Its shares closed at RM2.33, falling 4.9% from RM2.45 at the opening bell.
The selling of Masterskill’s shares is in sharp contrast to other education stocks, such as HELP International Corp and SEG International Bhd, which have been more resilient over the past week.
Masterskill CEO Datuk Seri Edmund Santhara, who is a major shareholder with a 22.1% stake, has seen his investment value drop substantially after the share price plunge.
Indeed, prospects for the education sector in general are seen as positive given its defensive recession-proof earnings, rising demand for local and twinning courses and a growing overseas student base.
Why then the specific sell-off in Masterskill?
The sell-down may be due to concerns that the National Higher Education Loan Fund (PTPTN) could be facing a deficit of RM46 billion, as highlighted in the 2009 Auditor-General’s (AG) Report. The matter was one of nine major irregularities identified in the AG’s report. Moreover, there are also fears Masterskill’s stock could see overhang pressures once the six-month moratorium on selling by its pre-IPO investors ends on Nov 18.
According to the AG’s report, based on cash flow projections, PTPTN will face a deficit of RM45.89 billion up to the end of the 11th Malaysia Plan in 2016.
As such, PTPTN needed additional funds amounting to RM8.56 billion under the Ninth Malaysia Plan, RM15.67 billion under the 10th Malaysia Plan and RM21.66 billion under the 11th Malaysia Plan.
Masterskill is said to rely on PTPTN to provide financing for 95% of its students.
Alliance Research issued a note yesterday on Masterskill following a teleconference with the group’s CFO. In the report, Alliance Research downgraded the stock from “buy” to “hold” and lowered its target price from RM4.20 to RM2.47.
The research house’s target price is based on a forward price-earnings ratio of 7.6 times, which is 40% below the industry average PER of 13 times.
“The steep discount to industry peers we deem justifiable, given the regulatory risk on Masterskill has heightened due to troubles in PTPTN, amid an impending end of the moratorium against certain shareholders,” it said.
The report notes that the moratorium on the selling of Masterskill shares held by pre-IPO shareholders is due to expire next week, though it adds that the group has received no indication of any intention by existing shareholders to sell their stakes.
On the PTPTN issue, Alliance Research said the government will need to address the shortcomings in PTPTN, though there has yet to be any formal response from the authorities on the matter. It notes that any revamp or reorganisation will likely be lengthy and protracted.
“Masterskill depends on PTPTN funding for 95% of its students. The issues in PTPTN and the lack of response from the government at present are increasing the uncertainty surrounding its ability to provide financing for its students,” the research house added.
The report also points out that substantial shareholder Fidelity Management and Research LLC, better known as Fidelity Investments, has been trimming its stake in the education group since Oct 14. By September this year, Fidelity had almost doubled its stake in Masterskill since its listing on May 18, owning 38.64 million shares, representing a 9.43% stake from the original 5.34%.
According to the latest filings with Bursa Malaysia, Fidelity still owns 36.3 million shares or an 8.87% equity stake in Masterskill as at Nov 1.
The management of Masterskill could not be reached for comment.
When contacted, Hwang DBS Vickers Research, which covers the stock, said it is maintaining its “buy” call on the stock despite the negative sentiment.
“We have spoken consistently with management and are not aware of any negative impact on the company’s fundamentals although sentiment surrounding the stock has turned negative because of the AG’s report,” said an analyst covering Masterskill.
This is not the first time Masterskill’s shares have succumbed to a sharp sell-down.
The stock suffered a sharp decline in its share price in September when it fell 26% to RM2.96. According to a Sept 26 report in The Edge, CEO Datuk Seri Edmund Santhara said the decline was possibly due to a sell down by a hedge fund. There have also been delays in the openings of Masterskill’s Kuching and Johor campuses.
The company’s shares then rebounded, reaching an intra-day high of RM3.49 on Oct 12, only to fall again, this time plunging to yesterday’s intra-day low of RM2.25, before recovering to close at RM2.33.
The stock has fallen 38.7% from its IPO reference price of RM3.80 when it listed in May, and is down 44.5% from its all-time high of RM4.30 reached in July.
An analyst notes that the PTPTN issue facing Masterskill is not prevalent in the education industry, as the majority of students in most private colleges, such as HELP International Corp Bhd, are self or privately funded and do not depend on government loans.
This article appeared in The Edge Financial Daily, November 9, 2010.
KUALA LUMPUR: Masterskill Education Group Bhd (MEGB) has been in the limelight over the past few weeks for the unexpected and quick dip in its share price.
The country’s largest operator of non-government nursing colleges had seen more than RM400mil wiped out of its market capitalisation since its share price peaked to RM4.30 on Aug 5 compared with its closing price of RM3.30 last Friday.
The freefall of its shares started in early September.
MEGB though, had been a promising listing this year. When it was listed on May 18, it was the biggest initial public offering (IPO) on Bursa Malaysia after Maxis Bhd’s relisting last year.
It raised RM775.2mil in its IPO, although the bulk of this having gone to early investors who were selling their shares in the company.
The IPO, done at a retail price of RM3.50 a piece, entailed an offer for sale of up to 164 million shares and public issue of 41 million shares.
The listing proceeds of RM143.5mil were to be used to purchase land and construct buildings to further expand its capacity.
The company had enjoyed a decent growth prior to its listing and even had plans of listing two years prior but global economic conditions put a stop to those plans.
Masterskill only had 214 students in 2004 and had grown to 17,000 at the point of its IPO this year, giving it a sizeable market share in the nursing and allied health education segment.
Masterskill had also shown an impressive growth in earnings. For the financial year (FY) ended Dec 31, 2008, it posted a net profit of RM72mil on revenue of RM202.9mil, up 40% and 60.4% respectively from the previous year.
For FY2009 net profit grew 35.3% to RM97.4mil while revenue grew 34.7%.For its first half of FY2010 ended June 30, MEGB’s profit rose to RM49.1mil from RM35.2mil previously while revenue was also higher at RM154.1mil against RM126.3mil previously.
Back to the recent sell down of its shares. Until now, the reasons for this and the identities of the sellers remain unclear but analysts have raised some concerns about MEGBs operations.
Among them were delays in the opening of two campuses and concerns that the Government could be looking to reduce a student loan service called Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) that funds the bulk of students at MEGB.
Aside from that, a few institutional investors in MEGB are believed to have been unimpressed with the level of information disclosure by the company.
In a recent note to clients, an international investment research house wrote that the chief executive officer (CEO) of MEGB has now appreciated more the need to be available to investors and has promised to hire an official investor relations person.
The CEO concerned is 39-year-old Datuk Seri Edmund Santhara, one of the younger CEOs among the ranks of public-listed companies with a market worth of more than RM1bil and winner of the 2007 Ernst & Young Entrepreneur of The Year award.
Santhara took the helm of the company in 2005, five years after the Masterskill School of Nursing & Healthcare was established.
Of his recent experience dealing with the sell down of his companies stock and assuaging fear of investors about the sustainability of MEGB’s earnings, Santhara said: “MEGB will strive to be more transparent and a more open communication strategy will be adopted for the benefit of all shareholders.”
Santhara holds the view that it was a few hedge funds that had sold down shares in his company, noting that big institutional funds who were bought in since MEGB’s IPO in May this year, have taken the opportunity of the weak price to buy more stock in the company.
He explained further: “MEGB has many shareholders who do not trade much in the shares of MEGB, as they are long-term investors. So when someone decided to sell for their own individual reasons, the illiquidity in the shares had caused the price to come down quite sharply. But do note that it has also rebounded sharply in a short span.”
On the issue of the delayed campuses, the company has since announced that one of the two, its Kuching campus, has finally got the necessary approvals and will begin operations next January while the problem with the Johor campus had been due to a corporate social responsibility issue of needing to allow the police force to temporarily occupy the said premises.
As for the PTPTN issues, according to a report by Alliance Research, Masterskill’s management has “rubbished off such a possibility as the reduction of PTPTN loan would be detrimental across the entire education sector.”
“Instead, PTPTN is proposing a new ruling to enforce the students to repay loans via salary deduction starting 2011.”
Another concern that had been raised about Masterskill was that its students are not necessarily highly sought after in the job market.
However, Santhara explained that was not necessarily true.
“Masterskill has been producing graduates since 2005. We have accreditation from the Government until 2015. As far as employment of our graduates is concerned, one should note that hiring is always based on academic performance. If our students score a cumulative grade point average (CGPA) below 2.5 points, they may face limitations in places that would take them. But we have 100% employment of our graduates who have scored more than 2.5 points in their CGPA,” he said.
Despite the recent sell down or maybe because of it, analysts are sanguine about the prospects of the company.
With a dividend policy of paying out up to 60% of net profits, and with a first interim dividend already paid out, the stock offers a decent dividend yield of close to 5% at its current price.
Analysts are also bullish about its growth prospects, and are assuming that the current hiccups with its campuses will be overcome in due time.
Santhara said that the recent events had not changed the fundamentals of MEGB.
“Very little has changed. There is a slight adjustment in our forecast numbers due to the slight delays in campus openings. But all this expected when operating in a highly regulated environment.”
He added, “MEGB operates in an industry with high barriers of entry. Demand for health care personnel is still growing, more than ever.
“It is evident that the Government realises that sustaining good healthcare for the public is important and so too is the financial support for education of rural folk. MEGB plays a big role in both of these areas.”
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