• From HR to education. SMRT was listed on the ACE market in Mar 2006. The group is primarily engaged in the business of designing, developing, consulting and implementing human capital or human development systems and solutions.
• In 2010, SMRT diversified into the education sector as it was awarded a 3-year contract worth RM30m p.a. by the Ministry of Education (MOE) for the direct recruitment and management of English Language Training (ELT) consultants to train over 2,000 teachers in 600 schools. Subsequently in Aug 14, SMRT was awarded another contract by the MOE to train and upskill 1,000 English teachers to increase their English proficiency (Pro ELT).
• On top of that, SMRT expanded into tertiary education via acquisition of Cyberjaya University College of Medical Sciences (CUCMS) in June 13, which has five faculties - medicine, pharmacy, allied health sciences, complementary and traditional medicine and business/management. The university sits on a 5.5-acre campus in Cyberjaya with a net floor area of 16,400 sq m. It has about 2,400 students (maximum capacity of 6,000 students), 60% of whom are governmentsponsored. Moving forward, SMRT expects education to contribute 85% of its revenue and net profit while its original HR and technology business will make up c.15%.
• Synergistic benefits from MEGB acquisition. In Nov 2014, SMRT, together with Creador LLC, offered to acquire MEGB’s Executive Chairman, Siva Kumar 32.9% stake at 60 sen/share. As Creador already owns a 19% stake, the offer will trigger a mandatory general offer (MGO) at 60 sen/share.
• To recap, private equity fund Creador has made numerous high-return investments on Bursa Malaysia for its fund since 2011 and achieved strong returns on its investments such as Old Town, GHL Systems and Bonia. Its other notable investments were MyEG, IFCA MSC and etc. Creador promised to underwrite the balance of MEGB’s MGO take-up (SMRT will only hold 20-25% of MEGB), which signals Creador’s confidence in SMRT’s ability to turn around the company.
• The proposed acquisition of MEGB will transform it from a single campus university to one with a national footprint, with vast potential for synergistic benefits via MEGB’s various main campuses in PJ, Kuching, Kota Kinabalu, Cheras and Kota Bahru. MEGB encompasses two associate institutions, namely Asia Metropolitan University (“AMU”) that was registered with the Ministry of Education (formerly known as Ministry of Higher Education) (“MOE”) in 2004 and officially attained university college and university status in 2008 and 2012 respectively.
• SMRT-Creador intends to change the name of both the listed entity and the education group to Asia Metropolitan University and to invite highly respectable educationists onto AMU’s Board of Governors.
• Undemanding valautions against its peers. SMRT’s share prices tumbled 44% from a high of RM0.93 (3 Nov 14) to a low of RM0.54 (26 Jan) before consolidating sideways to end at RM0.555 yesterday. Currently, SMRT is trading at 1.59x P/B, about 54% discount to its peers.
• A decisive breakout above RM0.585-0.60 will spur prices to retest RM0.66- 0.70 zones. As reflected in its daily and weekly charts, SMRT is poised to bottom up and stage a breakout above immediate resistance of 20-d & 30-d SMAs at RM0.585-0.60 levels after a brief sideways consolidation. A decisive breakout above these levels will spur prices to RM0.635 (50-d SMA), RM0.66 (38.2% FR) and our long term price objective of RM.70 (100-d & 200-d SMAs).
• Key supports are RM0.54 and RM0.535 (16 Oct 13 intraday low). Cut loss at RM0.525.

Source: Hong Leong Investment Bank Research - 13 Feb 2015