Period  4Q13/FY13

Actual vs. Expectations The FY13 net profit of RM32.9m is above expectations, accounted for 119.9% and 110.7% of our forecast and the street’s consensus, respectively. The key reasons were: (i) higher number of students’ intakes, and (ii) lower fixed cost and administrative expenses.

Dividends  An interim single tier dividend of 2.5 sen per share was declared during 4Q13. The FY13 total net dividend of 7.5 sen per share is above our 6.8 sen assumption.

Key Result Highlights  YoY, the FY13 revenue dropped by 16.8% to RM237m (FY12: RM284.9m) while net profit dipped 22.05% to RM33.0m (FY12: RM60.3m), no thanks to the delay of international student arrivals as a result of the new visa ruling implementation and the high number of graduating students from the nursing faculty during early CY13.

 QoQ, revenue marginally climbed by 1.3% to RM61.9m in 4Q13. Nonetheless, PBT tumbled 29.2% to RM5.2m (FY12: RM7.4m) as a result of the higher fixed and operating expenses. Its net profit, however, surged 36% to RM8.3m as a result of RM3.2m deferred tax as opposed to RM1.3m tax expenses in the prior quarter.

Outlook  The outlook appear promising underpinned by: (i) higher number of student intake due to the liberalisation of the EMGS ruling, (ii) more higher margin programmes to be introduced within this year, particularly from an increasing number of its online programs and Early Education Programs, and (iii) better cost efficiency.

Change to Forecasts Raised FY14 and FY15 net profit forecasts to RM38.1m (6.1%) and RM44.4m (9.6%), respectively, after imputing: (i) higher number of student assumption for FY14E and FY15E, (ii) higher gross profit margin, and (iii) fine-tuning.

Rating Maintain UNDERPERFORM.

Valuation  Correspondingly, our TP has been raised to RM1.29 (from RM1.17 previously), based on unchanged targeted FY15 PER of 22.0x, in line with its peer HELP International’s privatization targeted forward PER of 21.7x.

Risks to our Call Better-than-expected student enrolments.

Source: Kenanga