Journey to Wealth

Education - A Positive Move

kiasutrader
Publish date: Wed, 30 Jan 2013, 09:36 AM

THE BUZZ 

The Oriental Daily reported that the Ministry of Higher Education (MOHE) will impose a  two-year moratorium  on  the  setting  up  of  new  private  learning institutions  from  1 Feb 2013 onwards.

OUR TAKE 

Sufficient  supply.  According to the report quoting the Minister of Higher Education Datuk Seri Mohamed Khaled Nordin, the number of private institutions in the country is sufficient to  meet  current  demand.  The  Government  will  focus  on  enhancing  the  quality  of  tertiary education in line with global standards, to increase the competitiveness of local graduates. He  also  highlighted that  the  exceptions  would  include  world-renowned  universities  as  well as institutions that are currently in the process of a status upgrade or pending an upgrade. 
 
A  positive  move.  We  are  not  entirely  surprised  with  the  move  as  there  are  too  many tertiary  varsities  in  Malaysia,  considering  the  size  of  our  student  population.  Official statistics  from  MOHE  indicated  that  there  are  currently  498  private  tertiary  varsities  in  the country, comprising five foreign universities, 50 universities, 25 university colleges and 418 colleges,  which  altogether  have  an  estimated  total  of  some  500k students.  At  first  glance, this  works  out  to  be  a  reasonable  average  of  over  1k  students  per  establishment. Unfortunately, channel checks indicated that many of these - especially the private colleges -  are  either  dormant  or  are  operating  on  a  too-small  scale,  with  less  than  50  students registered. Hence, we laud the Ministry's moratorium, which we deem timely, as this would help to address the issues of oversupply as the Government tackles the quality of our local education system amid its move to transform the nation into a regional education hub.

Potentially  triggering  M&As?  Over  the  medium  term,  this  would  likely  spark  more  M&A activities  within  the  sector  given  that  new  players  in  the  industry  may  have  to  buy  out existing  institutions  to  secure  operating  licenses.  This  could  likely  lead  to  a  sector-wide consolidation, especially among the smaller players, which in our view is positive to phase out less competitive education providers. 

Prestariang:  one  of  the  last  beneficiaries.  The  impact  of  the  moratorium  on  existing education  providers  remains  unknown  for  now,  as  there  is  a  lack  of  more  affirmative indications  from  the  Ministry.  In  a  worst-case  scenario,  this  could  potentially  curb  future capacity expansion. From our quick checks with HELP (NEUTRAL; FV RM1.93) and SEGi (NEUTRAL;  FV RM1.75),  both  the  management  teams  believe  this  implementation  would likely have a minimal impact on their respective operations at this juncture. They have yet to receive any notifications from the Ministry itself. Meanwhile, we deem Prestariang (BUY; FV RM2.15) as one of the last pre-moratorium beneficiaries as it is possibly one of the last education  players  in  the  country  to  have  secured  a  full-fledged  university  license  from MOHE.
NEUTRAL. All in, we are positive on the ministry's decision, as this would help to alleviate the issues of a capacity oversupply in tertiary education for the immediate term. That said, we  are  maintaining  our  NEUTRAL  call  on  the  sector  pending  more  concrete  signals  from MOHE  on  whether  such  an  implementation  would  be  enforced,  should  existing  players embark  on  any  future  expansion  of  capacity.  Prestariang  remains  as  our  top  BUY  for  the sector, as it is set to launch its university in Cyberjaya tomorrow. 

Source: OSK
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