SMRT moving higher ... breakout of 0.915 today, might be due to the announcement yesterday. Few days ago, some asked if could buy in as they are not in the 'boat' yet. I said ... buy 90 cents should be OK but, need to wait for breakout. Today ... about 9.30am, it broken to new high, now at 93-94 level.
Well, many still holding at 80cents level ... some still hold from our initial 70cents entry level. I have traded her many times and quite glad with this counter. But, never fall in love in any counters. Never.
Emerging Gem with New Growth Engine - Tertiary Education by ZJ-We recently met up with SMRT Holdings Bhd (SMRT)'s Chairman and Chief Executive Officer,
Dato' Dr Palaniappan A/L Ramanathan Chettiar, together with his management team for an
update and went away feeling positive about the Group's prospect, driven by its education
business.
-New growth driver - CUCMS. To recap, SMRT has, up to January 2014, primarily been a
provider of integrated human resource (HR) development software solutions that also offer
complementary HR-related services such as consulting, outsourcing, learning and talent search.
Then, in June 2013, the Group announced its proposed acquisition of 70%-stake in In-Fusion
Education Sdn Bhd (IESB) for RM27.4 mln. IESB owns and operates the Cyberjaya University
College of Medical Sciences (CUCMS) in Cyberjaya, Selangor. With the completion of the
acquisition in January 2014, SMRT has effectively diversified into the provision of tertiary
education in medical sciences.
-Briefly on CUCMS. CUCMS was set up in October 2005 under the Private Higher Educational
Institutions Act, 1996. As the name indicates, the university college specializes in the provision
of courses related to medical sciences. The main campus of CUCMS is located in Cyberjaya,
Selangor, and spans across 5.5 acres of land with a total built up of 200,000 sf. It has a
capacity to accommodate 3,500 students at any point in time. And given the nature of the
courses where a sizable portion of students are off-campus doing clinical training during certain
stage of their programs, we understand that CUCMS could technically enroll up to 6,000
students using its existing facilities without incurring further investment, by managing the course
time-tables. At the moment, the university college has approximately 2,400 students.
In terms of ranking, CUCMS is rated Tier 5 on Setara rating while its medical school achieved a
Tier 4 rating from the Malaysian Qualifications Agency (MQA) (note: there are 6 tiers with Tier 1
as weak and Tier 6 as outstanding)
Transfer to Main Market - Greater Appeal to Institutional Investors
The board of SMRT, through its appointed investment banker, has on 30 June 2014 announced
the proposed transfer of the listing of its entire issued and paid up share capital together with
the outstanding warrants from the ACE Market to the Main Market of Bursa Malaysia.
In the announcement, SMRT has detailed out the requirements for the proposed transfer, all of
which it has fully complied. The criteria involved include:-
o achieving a minimum cumulative profit track record of RM20 mln over the last 3 to 5
years with at least RM6 mln in the most recent financial year;
o healthy financial position with sufficient working capital for the next 12 months, positive
operating cash flow and absence of cumulated losses in the most recent audited
balance sheet; and
o having a minimum public shareholding spread of at least 25%.
Good timing. We opine that the proposed transfer is at an opportune time, where the Group's
earnings are expected to grow substantially. The transfer to Main Market would enable SMRT
to attract the attention of institutional shareholders, who are mostly not keen or not allowed to
invest in the ACE Market. From our checking on Bursa Malaysia website and SMRT's 2013
annual report, we noted that there are no institutional shareholders at this juncture. Upon the
successful transfer to Main Market, we believe the Group may draw interest from institutional
shareholders with its growth story as an education player. SMRT endeavors to complete the
transfer exercise by 4th quarter of 2014.
Private placement shares @RM0.64/share. SMRT also announced on 1 July 2014 that the
Board has fixed the issue price of its private placement shares at RM0.64/share. The issue
price represents a discount of 9.4% over the 5-day volume weighted average market price of
SMRT shares up to 30 June 2014. To recap, the Group had in May 2014 announced to
undertake a private placement exercise. Based on the 19.5 mln private placement shares to be
issued, the Group is expected to raise some RM12.5 mln in proceeds, which it would use for
working capital and bank borrowing repayment purposes (after defraying the expenses
associated with the exercise). We anticipate to see the emergence of some institutional
shareholders through this placement exercise.
Recommendation
We recommend a long term BUY call on SMRT and peg our fair value to RM1.01. We like the stock for its growth potential in the tertiary education sector led by its hands-on management.
We noted the share price of the stock has run up substantially in 2014 from circa 20 sen to the current
level. We attribute the excitement to various factors, including the expected significant jump in
SMRT's earnings following the completion of the acquisition exercise in January 2014 and business
turnaround in CUCMS; as well as investor realization of the growth prospect of the enlarged Group
going forward.
We expect the profile of SMRT to improve further with the impending transfer to Main
Market. Nevertheless, we do advocate investors to be cognizant of possible correction or
consolidation in share price that may ensue following the recent exponential rise. We recommend
investors to accumulate the stock gradually and prudently to reap the long term prospects of SMRT.
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Ok, read all we want ... now, what is our action? Buy? Or if u r in position, lower price ... add more? Or ... just watch it moving higher to RM1(selling point?) and just busy talking about it?
Note : I have just added my position this morning. Trade at your own risk and do ask those know-how.
TEH