THE BUZZ
The Oriental Daily reported that the Ministry of Higher Education (MOHE) will impose a two-year moratorium on the setting up of new private learning institutions from 1 Feb 2013 onwards.
OUR TAKE
Sufficient supply. According to the report quoting the Minister of Higher Education Datuk Seri Mohamed Khaled Nordin, the number of private institutions in the country is sufficient to meet current demand. The Government will focus on enhancing the quality of tertiary education in line with global standards, to increase the competitiveness of local graduates. He also highlighted that the exceptions would include world-renowned universities as well as institutions that are currently in the process of a status upgrade or pending an upgrade.
A positive move. We are not entirely surprised with the move as there are too many tertiary varsities in Malaysia, considering the size of our student population. Official statistics from MOHE indicated that there are currently 498 private tertiary varsities in the country, comprising five foreign universities, 50 universities, 25 university colleges and 418 colleges, which altogether have an estimated total of some 500k students. At first glance, this works out to be a reasonable average of over 1k students per establishment. Unfortunately, channel checks indicated that many of these - especially the private colleges - are either dormant or are operating on a too-small scale, with less than 50 students registered. Hence, we laud the Ministry’s moratorium, which we deem timely, as this would help to address the issues of oversupply as the Government tackles the quality of our local education system amid its move to transform the nation into a regional education hub.
Potentially triggering M&As? Over the medium term, this would likely spark more M&A activities within the sector given that new players in the industry may have to buy out existing institutions to secure operating licenses. This could likely lead to a sector-wide consolidation, especially among the smaller players, which in our view is positive to phase out less competitive education providers.
The Oriental Daily reported that the Ministry of Higher Education (MOHE) will impose a two-year moratorium on the setting up of new private learning institutions from 1 Feb 2013 onwards.
OUR TAKE
Sufficient supply. According to the report quoting the Minister of Higher Education Datuk Seri Mohamed Khaled Nordin, the number of private institutions in the country is sufficient to meet current demand. The Government will focus on enhancing the quality of tertiary education in line with global standards, to increase the competitiveness of local graduates. He also highlighted that the exceptions would include world-renowned universities as well as institutions that are currently in the process of a status upgrade or pending an upgrade.
A positive move. We are not entirely surprised with the move as there are too many tertiary varsities in Malaysia, considering the size of our student population. Official statistics from MOHE indicated that there are currently 498 private tertiary varsities in the country, comprising five foreign universities, 50 universities, 25 university colleges and 418 colleges, which altogether have an estimated total of some 500k students. At first glance, this works out to be a reasonable average of over 1k students per establishment. Unfortunately, channel checks indicated that many of these - especially the private colleges - are either dormant or are operating on a too-small scale, with less than 50 students registered. Hence, we laud the Ministry’s moratorium, which we deem timely, as this would help to address the issues of oversupply as the Government tackles the quality of our local education system amid its move to transform the nation into a regional education hub.
Potentially triggering M&As? Over the medium term, this would likely spark more M&A activities within the sector given that new players in the industry may have to buy out existing institutions to secure operating licenses. This could likely lead to a sector-wide consolidation, especially among the smaller players, which in our view is positive to phase out less competitive education providers.
Prestariang: one of the last beneficiaries. The impact of the moratorium on existing education providers remains unknown for now, as there is a lack of more affirmative indications from the Ministry. In a worst-case scenario, this could potentially curb future capacity expansion. From our quick checks with HELP (NEUTRAL; FV RM1.93) and SEGi (NEUTRAL; FV RM1.75), both the management teams believe this implementation would likely have a minimal impact on their respective operations at this juncture. They have yet to receive any notifications from the Ministry itself. Meanwhile, we deem Prestariang (BUY; FV RM2.15) as one of the last pre-moratorium beneficiaries as it is possibly one of the last education players in the country to have secured a full-fledged university license from MOHE.
NEUTRAL. All in, we are positive on the ministry’s decision, as this would help to alleviate the issues of a capacity oversupply in tertiary education for the immediate term. That said, we are maintaining our NEUTRAL call on the sector pending more concrete signals from MOHE on whether such an implementation would be enforced, should existing players embark on any future expansion of capacity. Prestariang remains as our top BUY for the sector, as it is set to launch its university in Cyberjaya tomorrow.
Source: OSK
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