The demerger of SMRT Holdings Bhd from its education arm Minda Global Bhd has caught the interest of investors as it brings the former back to square one, making it a pure technology play. SMRT Holdings, which began as a human resources software company, expanded into the education sector in 2017 by taking a controlling stake in Masterskill Education Group Bhd, now known as Minda Global. However, Minda Global has been a drag on SMRT due to its losses, and the group is now decoupling from its education business to focus on its technology solutions business, including its IoT managed services provider N’osairis Technology Solutions Sdn Bhd (NTS).

N’osairis Technology Solutions Sdn Bhd specializes in designing, setting up, and managing your entire IoT ecosystem. They offer an integrated solution to help businesses set up their IoT ecosystem. They also offer services such as cloud computing, cybersecurity, data analytics, and more.

SMRT’s share price has increased by more than 183% year to date, indicating that investors have started to pay attention to the group. SMRT's latest proposed acquisition of the remaining 36% stake in NTS has also been viewed positively, as it would give SMRT 100% control of the company, which has been profitable. This report will analyze the potential of both SMRT and Minda Global and provide a forecast of their future potential.

SMRT Holdings has repositioned itself as a pure technology play, following its demerger from Minda Global. The move is seen as a positive development, given the drag that Minda Global had on SMRT. SMRT's focus on its technology solutions business is expected to yield better returns, as it has a different cost and return profile than the education business, which requires a lot of capital and operational expenses.

The acquisition of the remaining 36% stake in NTS has been viewed positively by investors, as it would give SMRT full control of the company. NTS provides managed IoT solutions to enterprises, and its clients include Tenaga Nasional Bhd, the Mydin chain of stores, Pan Malaysia Pools Sdn Bhd, Indonesia's Perusahaan Listrik Nasional, and some of Australia's Commonwealth Bank's branches. The company has been profitable and has seen its earnings rise over the years, reporting net profits of RM9.14 million, RM14.02 million, and RM20.1 million in the financial years ended Dec 31, 2019 (FY2019), FY2020 and FY2021 respectively.

NTS's net profit margin has been growing from 21.77% in FY2019 to 39.43% in FY2021, indicating that the company has been able to improve its efficiency and profitability. The proposed acquisition of the remaining stake in NTS is a related-party transaction, and Palaniappan's sons are indirect shareholders of NTS. However, the proposed acquisition does not come with a profit guarantee.

NTS's value is estimated at RM200 million, based on its audited FY2021 net profit of RM20.11 million and a price-earnings (PE) multiple of 9.95 times. If NTS is valued at RM200 million, it means SMRT's share price should be at least 45 sen per share, which is almost fully valued at the time of writing, based just on the value of NTS. However, if one were to take the historical PE multiple of Kronologi Asia Bhd of 17 times, NTS could be worth RM340 million, translating into a valuation of around 75 sen per share for SMRT.

While SMRT's demerger from Minda Global signals a strategic shift towards technology solutions, it leaves Minda Global as a standalone education company with renewed focus on growth and profitability.

Minda Global has gone through a period of restructuring and transformation since its acquisition by SMRT in 2017. The company has divested non-core assets, rationalized its operations and improved its financial performance. As mentioned in the article, Minda Global reported a net profit of RM6.5 million in FY2022, marking a continuation of its turnaround from the loss-making years.

Minda Global operates a portfolio of education institutions including Malaysia-based Asia Metropolitan University, PT Metropolitan Medical Centre in Indonesia, and the Masterskill Education Centre of Nursing and Health (MECNH) in Malaysia. The company also offers diploma, degree, and postgraduate programs in healthcare, business, and engineering.

In FY2022, Minda Global's healthcare education segment continued to be the largest contributor to its revenue and profit, followed by its business education segment. The company also recorded an increase in international student enrolments, which suggests that its programs have gained traction beyond Malaysia.

While the demerger from SMRT could be seen as a setback for Minda Global, it also presents opportunities for the company to chart its own path and pursue growth initiatives that are more aligned with its core education business. Minda Global's management team has indicated that it plans to explore new partnerships and collaborations with industry players to enhance its offerings and expand its reach.

Furthermore, Minda Global's financial position is also expected to strengthen after the completion of the proposed disposal of SMRE's stake to Palaniappan's private vehicle SFH. The disposal will result in a cash inflow of RM49.5 million, which could be used to fund Minda Global's growth initiatives, invest in technology and infrastructure, or repay debt.

Overall, while Minda Global's growth prospects may be more modest than that of SMRT's technology solutions business, the company has shown resilience in weathering the challenges of the pandemic and making strategic moves to improve its financial performance. As the company continues to focus on its core education business, it has the potential to build a sustainable business model and deliver long-term value to its shareholders.

In conclusion, the demerger of SMRT Holdings from Minda Global has set both companies on a new path towards growth and profitability. With SMRT focusing on its technology solutions business, including its IoT managed services provider N’osairis Technology Solutions, the company is poised for better returns and increased investor attention. Meanwhile, Minda Global has been reinvigorated as a standalone education company, with a renewed focus on growth and profitability. The company's successful transformation and improvement of its financial performance suggest that it has the potential to build a sustainable business model and deliver long-term value to its shareholders. Overall, both SMRT and Minda Global present interesting opportunities for investors to tap into the growing technology and education sectors in the region.

It is my hope that the information provided in this article will be useful for all investors. My intention is simply to share information about a company that has the potential to bring profit to investors. Ultimately, any decision made is up to the individual.

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