Masterskill’s  1QFY13  core  loss  of  MYR12.6m  was  way  below  our expected full-year  net loss of MYR17m. The company  remained  in the red as  operating and  distribution expenses swelled while registrations had  yet to pick up. Nonetheless, we maintain  our  NEUTRAL  call as  we think  a  potential  bumper  dividend  is  increasingly  likely.  Our  FV  now stands  at  a  lower  MYR0.55,  pegged  to  an  unchanged  0.7x  P/NTA  on FY14 numbers.

-  Still in the red. Masterskill’s 1QFY13 revenue slumped 29.0% q-o-q and 51.2% y-o-y to MYR21.5m, on the back of mediocre student enrolments. This led to 1QFY13 core loss of MYR12.6m (<100% y-o-y; -1.6% q-o-q), marking its 6th consecutive quarter of losses.

- MYR58.9m assets disposal. Masterskill announced that it had accepted a conditional offer to dispose  of  10 pieces of its land  worth  a  combined MYR58.9m,  which  almost  doubles  its  original  net  book  value  of MYR34m.  We  believe  that  Management  would  use  the  proceeds  from this exercise  –  which is expected to be completed by 3Q this year  –  to retire its outstanding debt of approximately MYR64.5m as of 1QFY13. 

- Potential for more?  Post-disposal, the company still holds a total of 37 properties,  with  a  total  net  book  value  of  MYR174.3m.  We  gather  that Management is currently in talks to dispose  of  all the remaining assets. Assuming that all of its fixed assets are disposed  of at their current book values, this would translate into a potential bumper cash return of 42.5 sen to existing shareholders, after retiring all its debts. 

- Maintain  NEUTRAL.  In  view  of  yet  another  disappointing  quarter,  we slash  our  FY13  and  FY14  earnings  forecasts  further  by  46.94%  and >100% respectively. We  are  now  projecting  for a  core loss of MYR25m for FY13 and MYR19m for FY14.  While still in losses,  we  think that  the share  price  could  find  some  comfort  with  the  ongoing  asset  unlocking exercise.  Hence,  maintain  NEUTRAL  for  now,  as  we  think  a  potential bumper dividend is increasingly likely. Our FV now stands at MYR0.55, down from MYR0.61previously, pegged to an existing 0.7x P/NTA on our FY14 forecasts.

Source: RHB