News  In a Bursa announcement, SEGi’s wholly owned subsidiary, SEG International Group Sdn Bhd, has proposed to dispose off 100.0% of SEGi International Learning Alliance Sdn Bhd (SILA), for a cash consideration of RM14.0m.

 The principal activities of SILA are investment holding and provision of training and education services. It is also the owner of a parcel of vacant freehold commercial land (12 acres), identified as HS (D) 280409, PT 29532 located within Negeri Selangor Darul Ehsan.

 This land carries a net book value of RM54.73m, and it is valued 5.0% higher at RM57.5m (as appraised by the independent valuer), of which RM44.0m would be assumed by the Purchaser as term loan.

 The proposed deal is expected to be completed within the first quarter of 2015.

Comments  We are MILDLY POSITIVE on the deal as the proceeds from the land disposal will only bring minimal interest savings to the Group, of which interest expense only accounts for RM1.9m to net profit. In addition, the draw-down of debt will only strengthen the Group’s current net cash position, where the proceeds could be used to finance SEG’s working capital requirement.

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

Forecast  There is no impact towards our FY14E NP forecast as the proposed disposal is expected to be completed during 1Q15. Meanwhile, we raised our FY15E net profit (NP) by 1.8% to reflect potential saving in interest expense.

Rating Maintain UNDERPERFORM

Valuation  Our TP of RM1.29 based on targeted FY15 PER of 22.0x remain unchanged due to minimal impact.

Risks to Our Call Better-than-expected student enrolment.

Source: AmeSecurities