Friday, May 07, 2010

Masterskill Found Strong Interest

I personally do not have an investment view on Masterskill. Masterskill Education Group Bhd's net profit for the year ending Dec 31, 2010 is expected to grow by 22 per cent, assuming that the number of students will increase by 33 per cent to 22,790. It recorded an audited revenue of RM273.4 million and net profit of RM97.4 million for its financial year ended Dec 31, 2009.

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If I were to buy, I would definitely have to visit the company and check the numbers. I have a lot of questions for sure. Revenue of RM273.4m divided by 22,790 students = RM11,996 per student. I am sure they have other revenue streams, but it would be hard stuff to get 22,790 students to pay even RM8,000 a year for a few years. We are not talking of a twining overseas college kind of tuition. Assume RM8,000 a year plus living expenses assuming the majority not being from KL would add another RM15,000 a year minimum.

I don't know man, RM23,000 is a lot of money per student for one average family to bear. That's assuming the family only got one child studying. I think its OK if the college was having 3,000 or 4,000 students but 22,790 students means an awful lot of students, covering a very wide spectrum of families.

My next question would be how many more healthcare workers do we need? How many more would be lining up to be one. Unless we are building a new hospital every 3 months, soon supply will exceed demand, and wages will stay stagnant, and then not many more will consider healthcare to be a desirable occupation. Hence I would need to go and really check out the books and figures and various data in order to have a view on Masterskill. I have no investment view on the stock, just some questions.


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The Malaysian operator of nursing schools prices at the top and upsizes in full for a total deal size of $243 million.

By Anette Jonsson | 6 May 2010 , FinanceAsia

Malaysia's largest private-sector operator of nursing schools, Masterskill Education Group, has raised M$779 million ($243 million) in Malaysia's largest initial public offering so far this year. In completing the deal, Masterskill has shrugged off the deteriorating market conditions and rising risk awareness that have forced several other IPO candidates to either cancel or downsize this week.

In sharp contrast to those war stories, Masterskill attracted a strong book of international investors that included specialist education funds and global funds as well as sovereign wealth funds, according to a source. The overall deal was more than five times covered, which allowed the upsize option to be exercised in full, increasing the final deal size to 50% of the company from a base size of 40%. It also enabled the company to fix the price at the top of the M$3.00 to M$3.80 offering range.

People close to the deal said the interest was primarily due to the sector, with both education and healthcare being hot topics among investors. In fact, this was the largest IPO in the education sector in Asia ever, which would have helped attract the specialist funds, they said. But Masterskill also offered a fairly unique combination of a competitive yield and high growth opportunities. Together with the fact that Malaysia is traditionally a low-beta market, that would have gone down well in the current market environment, which has seen a sharp rise in volatility in the past week. The fact that the Malaysian ringgit is on an upward trend against the US dollar wouldn't have hurt either.

That said, the level of interest was still somewhat surprising since the IPO was in fact a partial exit by venture capital firm Crescent Point Capital, which invested in Masterskill in 2006 as part of a leveraged buyout. Crescent, which is also known for its investment in Air Asia, reduced its stake in the company to 23.7% from 52.6% before the IPO, which means that there will no longer be any one sponsor or large corporation behind Masterskill, which will continue to be run by its entrepreneurial founder Dato S'ri Edmund Santhara.

The company sold 164 million shares as part of the base deal and another 41 million shares through the exercise of the upsize option. Only 25% of the base deal was made up of new shares, while the upsize option consisted entirely of secondary shares, meaning the company raised only $49 million of fresh capital that can be put to work to expand the business.

Based on the IPO price of M$3.80, the company offered a projected yield of 4.6% for 2010 and was valued at a price-to-earnings multiple of 13 times, also for this year. The latter was in line with Singapore-listed Raffle's Education, which was viewed as one of the closest comparables. The fact that Masterskill focuses exclusively on training and education for the healthcare sector means that it doesn't have any direct comps, however.



The retail tranche was upsized slightly too by about 16% from an initial target of 15% following large amounts of orders particularly from the ethnic Malay community. The rest went to institutional investors with no breakdown between international and domestic accounts. The total institutional demand was said to have been split evenly three-ways between Malaysia, the rest of Asia and Europe and, according to a source, the deal attracted more than 150 institutional investors.

The offering was jointly arranged by CIMB and Goldman Sachs.

5 comments:

kl said...

Goldman Sach's involvement must have helped with foreign investors. Don't like this offering. Somewhat pricey for my taste. Financial numbers a bit suspect too. Sustainable, ah, in the longer term? Was the jewel polished up before sale? Should be some premium upon listing given names involved in its IPO. I would be a stag if so.

Wedding Gifts, Favours, Bells... said...

they always make them look good during IPO stage... after 1FY results, all optimism will be gone...

see said...

RM11k per student courtesy of govt study loans PTPN .....95% of students under PTPN!

K C said...

Projections of dividend yield 4.6%, PER 13? HELP Institute with its years of track record gives you better yield and lower PER (I think so as I have not analyzed its financial statement yet). I could find scores of public listed companies with established records and much better than what is promised by Masterskill. Anyone thinks the actual results of Masterskill can be better than promised? Gila! How come there are investment banks willing to underwrite this IPO?

elizabeth said...

A couple of weeks ago saw a headline screaming in the Star, that there is over supply of nurses... Go figure.