KUCHING: SEG International Bhd’s (SEGi) is set to conserve funds for its future growth in its effort to become an integrated education player as it seeks to resolve operating issues for SkillsMalaysia International Technical and Vocational Training Programme (INVITE) project.
“In line with SEGi’s future expansion plans to become an integrated education player, adding pre-schools, primary and secondary schools to its portfolio, it recently revised its dividend policy, from a 50 per cent dividend payout to a discretionary policy,” the research arm of Kenanga Investment Bank Bhd (Kenanga Research) said in its research report.
Under the new dividend policy the payout depended on the group’s future cash flow ability. This was aimed at conserving funds for its future growth, with its upcoming international school project capital expenditure (capex) budgeted at approximately RM180 million.
While the school had been tentatively scheduled to be completed by the end of 2014, the research house believed that the group would gear up its existing net cash position at the expense of a higher dividend payout going forward.
“Hence we have revised down our dividend yield based on a more conservative view while maintaining our financial year 2012 divided payout assumption at 50 per cent or a three per cent of net dividend yield,” the report explained.
Among other contributions to the research house’s cautious outlook on the group are higher than expected staffs cost increase as a result of its ongoing faculty expansion and slower pace of net increase in the number of students due to the high number of nursing student graduation going forward.
“There are about 2,500 nursing students or nine per cent of its total students graduating in the third quarter of 2012. This had resulted in a sharp fall in SEGi’s total student population,” said Kenanga Research. It also believed that the large graduation number was partly due to the higher number of nursing student intake during the ‘nursing bandwagon’ in 2009.
To add to that, SEGi foresaw up to two more batches of nursing students to graduate in financial year 2013. As such, it aimed to replenish the shortfall with the intake of more international and local students for its various other programmes.
“We estimate SEGi to have 27,500 and 30,300 students in financial years 2012 and 2013 respectively.”
To recap, SEGi was appointed by the Malaysian government as the project leader for SkillsMalaysia INVITE to provide technical and skills-based training to foreign trainees and learners.
Kenanga Research noted that the progress of this G2G initiative project was currently at an advanced stage. However, it believed that SEGi needed to resolve some operational issues before a major rollout expected by mid-2013.
Kenanga Research went on to trim its financial years 2012 to 2013 expected net profits for SEGi by 15 and 13 per cent to RM79.7 million and RM101.9 million respectively.