HELP  announced yesterday that it received a conditional takeover  offer from Better Education Enterprise SB (BEE) to acquire its entire equity at MYR2.53/share. We deem the offer price attractive  as this implies FY14 P/E valuation of 18.4x,  a  20.0% premium  to its 5-year historical  average P/E  of 15.3x. We raise  our FV to MYR2.53  to  reflect the offer price and advise investors to accept the offer. Upgrade to BUY.

• Takeover  offer.  HELP  announced  yesterday  that  it  received  a conditional takeover offer from Southern Capital Partners III Ltd (SCP III) through its vehicle, BEE, to acquire all its ordinary shares at a cash offer price of MYR2.53/share. This would value HELP at MYR359.3m.
• Fair pricing and attractive. We consider the offer price of MYR2.53 per share  to be  attractive. Compared to other education players  under our coverage,  at  the  privatisation  offer  price,  the  implied  18.4x  FY14  P/Erepresents a 53.8% discount to SEGi’s  (SYS MK, FV: MYR0.76, SELL) 28.3x  FY14  P/E  -  which  we  deem  justifiable  given  HELP’s  smaller student base and  scale of  operations.  The stock is trading at a 20.0% premium to its 5-year historical average P/E of 15.3x.  We also note that ICT training provider Prestariang (PRES MK, FV: MYR3.37, BUY) trades at  11.4x  2014  earnings.  HELP  has  also  traded  at  a  maximum  P/E  of 26.7x and minimum P/E of 6.9x over the past five years.
• Shareholders’  stake.  We  also  understand  that  two  of  the  largest shareholders,  namely Selangor Properties (SPR MK, NR) and Datuk Dr Paul  Chan  and  family  –  which  hold  an  effective  stake  of  51.0%  and 8.67%  respectively  –  have accepted the offer.  This fulfils  50.0% of the shareholders’ votes and makes the offer unconditional.
• Accept offer.  We  advise  investors to accept the offer price on hand   or dispose of  the stock if the share price  tracks nearer to MYR2.53. With that,  we  raise  our  FV  to  MYR2.53  as  we  peg  it  to  the  takeover  offer, which imply P/Es of 18.4x and 17.5x for FY14F and FY15F respectively. Given the approximate 10.5% upside to its last closing price of MYR2.29, we upgrade our call from Neutral to BUY.

Recommendation Chart

Source: RHB