It was reported that a General Offer (GO) for SEGI may happenas early as the end of next week. While GO pricing is unclear yet, it wasreported that the GO price could be close to RM1.71/share. However, this price wouldonly represent 10.4x and 9.0x of our estimated FY12 and FY13 EPS respectively.Hence, a higher GO price is likely needed to entice the minority shareholders. Inour view, the Offer Price should be closer to our valuation of RM2.41 or atleast matching the consensus target price of RM2.23. We believe that the GO forSEGI could trigger a rerating of the education sector. As for now, we seeRM1.71 as a floor price and reiterate our OUTPERFORM call. Out Target Price ismaintained at RM2.41, representing 14.6x and 12.8x to our estimated FY12 andFY13 EPS respectively.

The GO news.  It was reported that a GO may be announcedfor SEGI as early as the end of next week should issues between the interestedstakeholders and Navis Capital Partners Ltd be ironed out.  

Recall that  Navis, a private equity firm, is now thesecond largest shareholder after having acquired a 27.84% stake, equivalent to 114.8mshares, at RM1.71 per share last Thursday. This level of shareholding is stilllower than the 33% level that would trigger a Mandatory General Offer.  As such, Navis needs to join force with otherparties. It was also reported that Navis could rope in SEGi's Group ManagingDirector ' Datuk  Seri Clement Hii, the EmployeesProvident Fund (EPF) or another government-linked investment company (GLIC) asjoint offerors in the GO.  According toBloomberg data, SEGi's Group Managing Director -  Datuk Seri Clement Hii ' remains as SEGi'slargest shareholder with a 28.4% stake but if warrants were included, his stakeon a fullydiluted basis would increase to >30%-level. 

What's on the table?  According to The Star, the offer price could beclose to Navis' acquisition price of RM1.71/share, representing 10.4x and 9.0xto our estimated FY12 and FY13 EPS respectively. However, we believe this pricelevel may not be attractive enough to entice other shareholders. In our view,the Offer Price should be closer to our valuation of RM2.41 or at leastmatching the consensus target price of RM2.23. 

Impact to theindustry. Navis' acquisition of SEGI comes at the right timing where therecould be a major consolidation in the local education industry. It was reportedthat Ekuiti Nasional Bhd's (Ekuinas) Chief Executive Officer ' Datuk AbdulRahman as saying that education was one of the target industries for theGovernmentlinked private equity fund. Apart from having acquired a 90% stake inCosmopoint S/B, which owns and operates KL Metropolitan University College andCosmopoint International College of Technology, Ekuinas is also said to beeyeing Masterskill Education Group Bhd (Masterskill) and HELP InternationalCorp Bhd (HELP). As such, should the GO for SEGI materialise at an attractiveGO price, this should act as a re-rating catalyst to other listed education playerssuch as Masterskill and HELP.

Source: Kenanga