MEGB.. dated Feb 2011

Its Prospects … dated Feb 2011

Masterskill turned in a strong set of results for the financial year ended Dec 31, 2010 with full-year net profit rise RM4.9% to RM102.14 million while revenue climbed 15.5% to RM315.74 million.

With earnings per share of 33 sen, the stock is trading at a historical price-to-earnings ratio (PER) of just 5.6 times.

Masterskill also has a strong balance sheet, with RM99.41 million in net cash and offers shareholders a decent dividend yield. It paid an interim dividend of seven sen on Oct 13, 2010, and is expected to announce a final dividend for the year.

Since November 2011, the company’s share price, however, has come under selling pressure on concerns over PTPTN funding. With some 95% of Masterskill’s students reliant on PTPTN loans, those concerns were justified. However, some quarters argue that the concerns may be over-blown as all private colleges would have students who are reliant on PTPTN funding — although to lesser degree.

Moreover, PTPTN, as a national education funding scheme, is unlikely to be discontinued given its important social implications.

Of late (Feb 2011), Masterskill’s share price slumped further as foreign selling exacerbated, notably by two US-based funds, Fidelity Management and Research (FMR) LLC and SmallCap World Fund. After months of selling, both FMR and SmallCap World Fund ceased to be substantial shareholders of Masterskill on Feb 10 and Feb 16 2011 respectively.

Masterskill, on the other hand, is in the education industry which is relatively resilient, defensive and cash generating.