Kenanga Research: SEGi still positive despite earnings dip

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POSITIVE STANCE: SEGi remains positive, despite reporting a lower net profit, as it is actively recruiting new students and introducing more new home-grown programmes.

KUCHING: SEG International Bhd (SEGi) remains positive by actively recruiting new students and introducing more new home-grown programmes this year, despite reporting a lower ninth month financial year 2012 (9MFY12) net profit of RM57.8 million.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) stated that SEGi’s 3QFY12 revenue was down by seven per cent to RM74.3 million mainly due to the higher number of students graduating during the quarter.

The research team further added, “The group’s net profit dipped by 22 per cent to RM15.8 million as a result of a lower earnings before interest and tax (EBIT) margin of 26.4 per cent (31 per cent for 2Q12) from higher administrative and other expenses and a higher effective tax rate of 19.6 per cent (18.8 per cent for 2Q12).”

On a positive note, Kenanga Research opined that the group was expected to rebound due to the introduction of more new programmes within the year, particularly its home-grown programmes.

The research team’s optimistic view was echoed by RHB Research Institute Sdn Bhd (RHB Research), which said that SEGi could expect a recovery in earnings for FY13 through the recruitment of new students to make up for its graduated students.

“Management expects better earnings in FY13, as it will be increasing its average fees per student and this, coupled with the expected double digit student growth, could lead to higher revenue for the company,” RHB Research added.

The research firm revised its fair value to RM2 per share at 15 times FY13 fully-diluted earnings per share. On the other hand, Kenanga Research lowered its target price to RM2.32 per share (from RM2.45 per sharepreviously).