THE BUZZ
The Star reported that a general offer (GO) for SEG
International (SEGi) may be announced as early as the
end of next week by Navis Capital, its second largest shareholder with a
26.5% stake. The latter could potentially partner with SEGi’s existing single
largest shareholder, Datuk Seri Clement Hii, who holds a 28.4% stake.
OUR TAKE
Joint offer likely. From the daily’s interview with Datuk Seri
Clement Hii and reading between the lines, we opine that SEGi’s existing major
shareholder-cum-MD is likely to partner with Navis Capital to launch a GO.
Although our previous assumption that a GO might not take place at this
juncture could turn out to be wrong, the latest speculation still matches our
view that Datuk Seri Hii is unlikely to cash out on his 28.4% stake (or 31.4%
upon full conversion of his interest in warrants) in SEGi at this juncture,
based on the understanding that this is his core business focus for now.
Potential pricing.
To entice the minority shareholders, we believe the potential GO has to be
priced at a minimum of RM2.10/share (as opposed to Navis Capital’s existing
cost of RM1.71/share), which would then translate into FY12 and FY13 PERs of
16.6x and 15.0x respectively. We would
deem such a pricing fair considering SEGi’s sizeable student
base, which justifies the premium
that it should command over its
peers. At RM2.10/share, SEGi’s valuation would be at some 25% premium over HELP
(NEUTRAL, FV: RM1.55) and a 80% premium over Masterskill (SELL, FV: RM0.84).
Combined 54.9% stake
now. Taking a brief look at SEGi’s existing shareholding spread, the two
parties hold a combined 54.9% stake in SEGi, or an effective stake of 59.4% upon
the full conversion of their
respective warrants. To take the company
private, the pair would have to fork out some RM600m to buy out the minorities
based on RM2.10/share, which we see as not
much of an issue given Navis Capital’s huge assets under management of
some USD3bn.
BUY. We expect
to see more developments on this unfold
in the next 2 weeks and hence, maintain our BUY call on SEGi, at an
unchanged FV of RM2.17, based on 18x FY12 PER and a fully enlarged share base
of 748.4m. A re-rating on the sector as a whole is possible but not likely,
given the specific factors underlying each
of the education counters under our coverage.
Source: OSK188
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