PP 7767/09/2012(030475) MARKET DATELINE
Malaysia
RHB Research Institute Sdn Bhd A member of the RHB Banking Group
Corporate Highlights
Company No: 233327 -M
Re su lts N ote 31 July 2012 Share Price Fair Value Recom
SEG International 1H12 Net Profit Slightly Below Expectations
: : :
RM2.02 RM2.20 Outperform (Maintained)
Table 1 : Investment Statistics (SEG; Code: 9792) Net
Bloomberg: SYS MK
Net
FD
FYE
Turnover
profit
EPS
Growth
PER
C.EPS*
P/NTA
Gearing
ROE
NDY
Dec
(RMm)
(RMm)
(sen)
(%)
(x)
(sen)
(x)
(x)
(%)
(%)
2011a
278.3
72.3
9.7
15.3
21.2
-
5.8
0.0
33.7
6.2
2012f
333.0
87.3
11.7
20.7
17.6
13.0
4.6
0.0
34.9
3.4
2013f
409.8
111.5
14.9
27.8
13.8
16.0
3.7
0.0
36.6
4.4
2014f
485.5
124.3
16.6
11.5
12.3
19.0
3.0
0.0
33.6
4.9
Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC
♦
♦
♦
♦
♦ ♦
Below expectations. SEGi’s 2Q12 revenue of RM80.2m (+15.8% yoy; +3.0% qoq) and net profit of RM20.1m (+11.0% yoy, -8.1% qoq) brought 1H12 revenue and net profit to RM158m and RM42m respectively, that was slightly below expectations reaching only 44-45% of our and consensus fullyear estimates. No dividend was declared during the period. Hit by higher expenses during the quarter. SEGi recorded higher revenue of RM80.2m during 2Q12, boosted by the growth in student enrolment and the introduction of new homegrown and partner programmes. However, cost of sales was higher during the quarter, and with other costs (i.e. administrative) being fixed in nature, EBIT margin was dragged lower to 31% (from 34.8% in 1Q12 and 33% in 2Q11). Net margin also declined to 25.1% during the quarter, from 28.1% in 1Q12 and 26.2% in 2Q11. Acquiring an unquoted company. In a separate announcement, SEGi announced that its wholly-owned subsidiary, SEG International Group S/B, had acquired the entire issued and paid-up capital of Bumi Intuisi S/B for RM2.00. The intended activity of the company is software development where its core business activity is to provide total online training solutions. We are positive on this news, as we believe that the acquisition is in line with SEGi’s long-term expansion plans. Risks. These include: 1) Change in requirements set by the governing bodies; and 2) A change in policy by the Government might impact the eligibility criteria for students to obtain loans/scholarships; and 3) A change in policy by the Government might impact the eligibility criteria for foreign students to obtain student visas.
* Consensus Based On IBES Estimates RHBRI
Vs. Above
Consensus
In Line √
Below
√
Issued Capital (m shares) Market Cap(RMm)
559.1 1,340.1
Daily Trading Vol (m shs)
0.8
52wk Price Range (RM)
1.65-2.16
Major Shareholders: Pinnacle Heritage Solutions Dato' Clement Hii
(%) 41.5 24.9
Rexter Capital Sdn Bhd
5.0
FYE Dec EPS chg (%)
FY12 (5.9)
FY13 (3.9)
FY14 (3.9)
Var to Cons (%)
(10.3)
(7.3)
(12.9)
PE Band Chart PER = 21x PER = 18x PER = 15x
Relative Performance To FBM KLCI
SEG International
Forecasts. We have revised our FY12-14 earnings downwards by 3.9-5.9% p.a after revising our student growth and cost assumptions.
FBM KLCI
Investment case. We reiterate our Outperform call on SEGi, although we have reduced our fair value slightly to RM2.20 (from RM2.25), in line with our earnings revision. We value SEGi at 14.6x FY13 fully-diluted EPS, which is in line with RHBRI’s target market PE of 14.6x one-year forward earnings. We believe that SEGi remains an attractive investment due to its long-term growth prospects. Alia Arwina Izyani Azani Please read important disclosures at the end of this report.
(603) 9280 2162
[email protected]
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31 July 2012
Table 2: Quarterly Earnings FYE Dec (RMm) Revenue
2Q
1Q
2Q FY12
YoY (%)
6M
FY12
QoQ (%)
6M
FY11
FY11
FY12
YoY (%)
69.2
77.8
80.2
3.0
15.8
137.7
158.0
14.7
Operating profit
22.9
27.1
24.9
(8.2)
8.8
46.1
52.0
12.7
Net interest expense
(0.1)
(0.1)
(0.1)
(6.3)
(1.5)
(0.4)
(0.3)
(37.5)
Associates
Comments Stronger yoy growth in revenue was mainly due to the increase in student enrolment and introduction of new high-margin programmes.
0.0
0.0
0.0
nm
nm
0.2
0.0
(100.0)
Pre-tax profit
22.7
26.9
24.7
(8.2)
8.9
45.8
51.7
12.7
Tax
(4.5)
(5.2)
(4.7)
(10.0)
4.2
(9.3)
(9.8)
5.3
Minority interest
(0.1)
0.1
0.0
(62.3)
>100
(0.3)
0.2
>100
Net profit
18.1
21.9
20.1
(8.1)
11.0
36.3
42.0
15.9
Operating profit
33.0
34.8
31.0
33.5
32.9
Pre-tax
32.8
34.6
30.8
33.3
32.7
Effective tax rate
19.7
19.2
18.8
20.4
19.0
Net profit
26.2
28.1
25.1
26.3
26.6
Yoy income tax expense rose in tandem with the higher pre-tax profit.
Below expectations.
Margins (%) Yoy margin expansion is on the back of operating utilisation effect.
Effective tax rate remains below the statutory tax rate due to reinvestment allowances.
Source: Company, RHBRI
Table 3: Earnings Forecasts
Table 4: Forecasts Assumptions
FYE Dec (RMm)
2011
2012f
2013f
2014f
FYE Dec
2012f
2013f
2014f
Turnover
278.3
333.0
409.8
485.5
Number of students (in ‘000)
32.0
38.1
43.8
Turnover growth (%)
27.9
19.6
23.1
18.5
% of student growth
16.4
19.0
15.0
EBIT
88.8
109.9
139.3
155.3
Average revenue per students (in ‘000)
10.4
10.7
11.0
Net Interest
(0.7)
(0.8)
(0.8)
(0.9)
% of average revenue per student growth
3.8
3.0
3.0
Associates
0.2
0.5
0.5
0.5
Exceptionals
0.0
0.0
0.0
0.0
Pretax Profit Tax Minorities Net Profit
88.2
109.6
139.1
155.0
(16.0)
(21.9)
(26.4)
(29.5)
0.1
(0.4)
(1.1)
(1.3)
72.3
87.3
111.5
124.3
Source: Company, RHBRI estimates
Source: Company, RHBRI estimates
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31 July 2012 IMPORTANT DISCLOSURES This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report. This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report. RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans of any company that may be involved in this transaction. “Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports. This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel. The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues. The recommendation framework for stocks and sectors are as follows : Stock Ratings Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months. Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks. Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months. Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months. Industry/Sector Ratings Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon request. This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect.
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