Masterskill (MASEG) posted a 9MFY13 reported net loss of MYR134.8m. Excluding MYR88.2m in impairment loss during the quarter, its core net loss  of  MYR46.6m  was slightly below  estimates.  With that, we maintain our  NEUTRAL  stance,  with  our  FV  now  at  MYR0.37,  based  on  0.6x P/NTA on FY14 earnings,  as we remain cautious pending  further clarity on management’s strategy moving forward.

• Another  letdown.  MASEG’s  9MFY13  revenue  plunged  56.6%  to MYR51.4m  (vs  9MFY12’s  MYR118.5m)  as  it  failed  to  replenish  its dwindling  student  base,  weighed  down  by  the  reduction  in  National Higher Education Fund Corp (PTPTN)  loans  as well as the higher entry requirements stipulated for its nursing courses. While MASEG’s 9MFY13 reported  net  loss swelled to MYR134.8m  from  MYR15.4m  in  9MFY12, this was  distorted by an  impairment  provision  of  MYR88.2m  during  the quarter under review. Stripping  out  this one-off item,  its core net loss of MYR46.6m came in slightly below our  expectation.  The  dismal  3QFY13 results mark MASEG’s eighth consecutive quarterly loss.
• Slashing  estimates.  We  slash  both  our  FY13F  and  FY14F  estimates further  by  15.0%  and  95.4%  respectively  as  we  incorporate  lower student numbers as well as higher opex assumptions. We now project a a core net loss of MYR66.5m for FY13F and MYR59.4m for FY14F.
• Maintain NEUTRAL. We believe that the one-off exceptional item is part of  the group’s efforts to clean up its  books  to mark the beginning of a new chapter for MASEG.  That said, we remain cautious over its nearterm  earnings  as  we  await  further  improvements  should  management successfully revamp its business model and steer  the company  back  to the black.  Hence,  we maintain our NEUTRAL stance on the  stock,  with our  FV  now  at  MYR0.37  (from  MYR0.50). W e  now  value  the  stock  at 0.6x  P/NTA  (being  20%  premium  on  the  stock’s  2-year  trough  P/NTA valuation  of  0.49x)  compared  to  earlier  0.7x  P/NTA  (40%  premium  on trough P/NTA).  This is pending further clarity on  management’s  strategy moving forward.

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Company Profile
Masterskill Education Group is an investment holding company whose subsidiaries provide higher education and training in nursing and allied health sciences.

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Source: RHB