SEGi’s 9MFY12 net profit of RM57.8m was below both consensus and our forecasts, making up only 60.8% and 63.4% of both full-year estimates respectively. The 3QFY12 numbers were weaker than we previously expected owing to higher opex following its status upgrade as well as sub-par new enrolments during the period. Downgrade to NEUTRAL, with our FV reverted to RM2.09, pegged at a lower 16x FY13 PE on our revised forecasts.
A letdown quarter. SEGi’s 9MFY12 revenue jumped up 11.8% y-o-y to RM232.3m while core earnings were 5.9% higher at RM57.8m owing to an enlarged enrolment base of 28k as of September 2012. Nonetheless, the numbers were below our estimates as its students growth slowed down during the quarter. Meanwhile, its 3QFY12 revenue of RM74.3m was 6.2% higher y-o-y but 7.4% lower q-o-q as a higher number of students graduated during the quarter. Correspondingly, the company’s core earnings came in at RM15.8m, shedding over 21.6% y-o-y and 13.8% q-o-q as profits plunged, dragged down by higher opex. We attribute this to escalated personnel costs following its upgrade to a full-fledged university in September.
Dividend the sole consolation. Despite the subpar quarterly performance, the company still declared a first interim DPS of 5.0 sen. This implies a payout ratio of 61.5% YTD.
Slashing earnings projections. Given the poor set of results, we are revisiting our model and slashing our net profit forecasts by 8.8% for FY12, 6.7% for FY13 and 3.5% for FY14 by factoring in higher staffing costs as well as lower student growth over the
next three years. We now expect SEGi’s enrolment base to reach 29k by end-FY12, 32k by end-FY13, and 34k by end-FY14 vis-à-vis our previous forecasts for 30k, 33k, and 35k respectively.
Downgrade to NEUTRAL. Since we initiated coverage on the stock in July 2011, SEGi’s share price has yielded a decent return of over 20% to- date. Nonetheless, we are taking a more cautious approach at this juncture in view of the dismal results, which marks its first earnings disappointment since we initiated coverage. Hence, following our earnings revision, we are pegging a lower FY13 PE of 16x (from 18x previously), with our FV settling at RM2.09. Given the limited price upside, we are downgrading our call to NEUTRAL.
A letdown quarter. SEGi’s 9MFY12 revenue jumped up 11.8% y-o-y to RM232.3m while core earnings were 5.9% higher at RM57.8m owing to an enlarged enrolment base of 28k as of September 2012. Nonetheless, the numbers were below our estimates as its students growth slowed down during the quarter. Meanwhile, its 3QFY12 revenue of RM74.3m was 6.2% higher y-o-y but 7.4% lower q-o-q as a higher number of students graduated during the quarter. Correspondingly, the company’s core earnings came in at RM15.8m, shedding over 21.6% y-o-y and 13.8% q-o-q as profits plunged, dragged down by higher opex. We attribute this to escalated personnel costs following its upgrade to a full-fledged university in September.
Dividend the sole consolation. Despite the subpar quarterly performance, the company still declared a first interim DPS of 5.0 sen. This implies a payout ratio of 61.5% YTD.
Slashing earnings projections. Given the poor set of results, we are revisiting our model and slashing our net profit forecasts by 8.8% for FY12, 6.7% for FY13 and 3.5% for FY14 by factoring in higher staffing costs as well as lower student growth over the
next three years. We now expect SEGi’s enrolment base to reach 29k by end-FY12, 32k by end-FY13, and 34k by end-FY14 vis-à-vis our previous forecasts for 30k, 33k, and 35k respectively.
Downgrade to NEUTRAL. Since we initiated coverage on the stock in July 2011, SEGi’s share price has yielded a decent return of over 20% to- date. Nonetheless, we are taking a more cautious approach at this juncture in view of the dismal results, which marks its first earnings disappointment since we initiated coverage. Hence, following our earnings revision, we are pegging a lower FY13 PE of 16x (from 18x previously), with our FV settling at RM2.09. Given the limited price upside, we are downgrading our call to NEUTRAL.
Source: OSK
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