May 18, 2010

MASTERSKILL IPO Fairly Valued at RM4.10?

Valued at 11x 2011 PER, it would be fairly valued at RM4.10

Nursing a growth story. Masterskill catches the eye for its rapid growth in the niche areas of higher education for nurses and other allied health segments. Assuming a base case scenario of 25% revenue growth by 2011 over a 2-year period from 2009 to RM393m and net profit growth of 56.6% to RM152.5m in 2011, Masterskill would boast of a fair value of RM4.10 if it were valued at 11x 2011 PER.

A market leader. Masterskill is a leading provider of higher education courses primarily in nursing and other allied health courses. It has a 16% market share of the nursing  segment and a growing number of physiotherapists, medical lab technicians and other such allied health students that made up 69.8% of its 17,165-strong student population in 2009. It plans to build a new campus in Klang Valley and subsequently attract foreign students in its next two phases of growth post-2010.

41m new shares on offer and another 164m existing shares offered for sale. Masterskill IPO is offering 41m new shares to the public, eligible employees and graduates, as well as selected institutional and other investors at RM3.50/shr. The reference price was announced as RM3.80.

Feeding chronic supply shortages. Masterskill, quoting Ministry of Health (MOH) and independent data, estimates as many as 84,436 vacancies nationwide in nursing, 5,606 vacancies for pharmacists and 8,752 vacancies for Allied Health professionals, based on the UN and MOH targets for mid-level developing economies like Malaysia. Over time, as the country develops, expect such targets and thus vacancies
to rise further as consumer demands rise in tandem.

An attractive proposition. Masterskill’s future prospects seem bright with a strong position in its niche supported by healthy financials and a strong growth story. If Masterskill was valued at 11x 2011 PER, it would be fairly valued at RM4.10, offering a 17% share price upside to its retail price.

masterskill-financial-data

by Maybank Investment Bank