SEG International's (SEGi) FY11 core earnings of RM72.3mwere in line with both our and consensus forecasts, making up  95.3% and 98.4% of the  respectiveprojections.  Being one of the largestprivate education players in Malaysia with 30k students on board, we continueto like SEGi for its diversified course offering and established balancesheet  that is premised on an asset-lightmodel. Hence, maintain BUY at a revised FV of RM2.17 based on an unchanged 18xFY12 PER.

Within expectations.SEGi's FY11 revenue came in 27.9% higher y-o-y at RM278.3m due to higherstudent enrolment, which we estimate to have risen from 21k to 30k as of Dec2011. Correspondingly, the EBITDA margin widened 300bps to 31.9% on improvedeconomies of scale as enrolment growth outpaced the marginal increase in opex.Lower financing costs and a more favourable effective tax rate helped lift FY11core earnings to RM72.3m, which surged over 67.9% y-o-y. On a quarterly basis,4QFY11  results were generally up y-o-yon higher student enrolment but recorded a slight dip sequentially due toexpenses incurred in upgrading its campuses during the quarter. 

Cash pile of RM87.2m.  Although the company did not declare anydividends for the quarter, we continue to see potential for a bumper dividendgiven its sturdy cash pile of RM87.2m as of Dec 2011 (which translates into anet cash per share of 14.0 sen based on the  current share capital) aswell as its strong operating cash flow estimated at >RM100m p.a. for bothFY12 and FY13. Should its remaining 189.7m outstanding warrants which arecurrently trading at a slight discount of 1.5% be exercised, this willtranslate into an extra cash coffer of RM94.8m at the exercise price ofRM0.50/share. In our model, we assume a staggered conversion with an average63.2m warrants converted per year from FY12 to FY14.

BUY. We make nomajor changes to our core assumptions for now, with our FY12 core earningsforecast revised upward marginally by 0.5% to RM90.2m for book-keeping purposesfollowing its full-year results release. We also take the opportunity tointroduce our FY13 forecasts, with the net profit estimate coming in atRM99.6m. Maintain BUY with our FV now revised to RM2.17 based on an unchanged 18xFY12 PER and a fully enlarged share base of 748.4m shares upon the conversion ofall outstanding warrants.

Source: OSK188