We gather from a recent meeting with SEG International’s (SEGi) management that its proposed international school is making good progress and is on track for completion in the beginning of FY15. Meanwhile, we believe its tertiary segment’s disappointing 4QFY12 earnings are likely to have been due to weaker-than-expected new registrations. As such, we lower our FV to RM1.75, based on an unchanged 16x FY13 PE. Maintain NEUTRAL.
International school underway. SEGi has proposed to set up an international school on a 12-acre piece of land it acquired in Bandar Setia Alam for RM52m. The school will offer pre-school, primary and secondary education. Management is looking at a total capacity of 5k students and an initial capex outlay of RM80m-RM100m. Construction on the building is set to commence in two months and targeted for completion at the beginning of FY15.
Boost to earnings in the longer term. The school will cater to mid- and higher income families, which we deem reasonable, considering the demography of its surrounding areas. Assuming an average annual tuition fee of RM50k for a total of 5k students, we estimate that the international school could contribute RM20m-RM25m yearly to the group’s bottom-line. Based on the timeline proposed, we believe that the group should realize a full-year contribution by FY18 when enrolment hits full capacity.
University numbers fall short of OSK’s forecasts. Meanwhile, management has guided that its tertiary segment closed FY12 with 28k students, lower than our previous expectation of 29k. This shortfall could be attributed to increasing competition in the education industry given that the status of a number of existing tertiary institutions had been upgraded. As such, we expect SEGi’s 4QFY12 net profit to fall short of our expectations. In view of this, we are slashing our net profit forecasts by 19.5% for FY12, 21.8% for FY13 and 18.9% for FY14 as we raise our opex assumptions as well as lower our student growth estimates. Our revised forecasts for SEGi’s enrolment are 28k, 30k and 33k for FY12, FY13 and FY14 respectively.
NEUTRAL. Overall, we like the fact that SEGi is branching out and entering the growing private education sector. Nevertheless, as we expect the upcoming 4QFY12 numbers to be weaker, we continue to be prudent with our forecasts and revise our earnings accordingly. Our FV is now lower at RM1.75, based on an unchanged FY13 PE of 16x. Maintain NEUTRAL.
International school underway. SEGi has proposed to set up an international school on a 12-acre piece of land it acquired in Bandar Setia Alam for RM52m. The school will offer pre-school, primary and secondary education. Management is looking at a total capacity of 5k students and an initial capex outlay of RM80m-RM100m. Construction on the building is set to commence in two months and targeted for completion at the beginning of FY15.
Boost to earnings in the longer term. The school will cater to mid- and higher income families, which we deem reasonable, considering the demography of its surrounding areas. Assuming an average annual tuition fee of RM50k for a total of 5k students, we estimate that the international school could contribute RM20m-RM25m yearly to the group’s bottom-line. Based on the timeline proposed, we believe that the group should realize a full-year contribution by FY18 when enrolment hits full capacity.
University numbers fall short of OSK’s forecasts. Meanwhile, management has guided that its tertiary segment closed FY12 with 28k students, lower than our previous expectation of 29k. This shortfall could be attributed to increasing competition in the education industry given that the status of a number of existing tertiary institutions had been upgraded. As such, we expect SEGi’s 4QFY12 net profit to fall short of our expectations. In view of this, we are slashing our net profit forecasts by 19.5% for FY12, 21.8% for FY13 and 18.9% for FY14 as we raise our opex assumptions as well as lower our student growth estimates. Our revised forecasts for SEGi’s enrolment are 28k, 30k and 33k for FY12, FY13 and FY14 respectively.
NEUTRAL. Overall, we like the fact that SEGi is branching out and entering the growing private education sector. Nevertheless, as we expect the upcoming 4QFY12 numbers to be weaker, we continue to be prudent with our forecasts and revise our earnings accordingly. Our FV is now lower at RM1.75, based on an unchanged FY13 PE of 16x. Maintain NEUTRAL.
Source: OSK
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