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Monday, December 03, 2012

MEGB- the bleeding won't stop

Result Update

For QE30/9/2012, MEGB reported a net loss of RM7.7 million- an increase of 58% from RM4.8 million in QE30/6/2012. revenue dropped 11% q-o-q to RM35 million. The poorer results are attributable to the followings:
1. Lower student enrollment due to reduction in PTPTN loan amount & higher entry requirement for its nursing program;
2. Increase staff cost due to increase in the ratio of teaching staff to student from 1:30 to 1:20 for the science programs; and
3. write-off of renovation & equipment costs of RM5.3 million for some facilities that were vacated.


Table 1: MEGB's last 8 quarterly results

Chart 1: MEGB's last 14 quarterly results 

Valuation

MEGB (closed at RM0.575 on Friday) is now trading at a Price to Book of 0.53 time (based on NTA per share of RM1.06 as at 30/9/2012).We can't compute a PE for the stock as it is a loss-making concern.

Technical Outlook

MEGB has just broken below its recent low of RM0.585. Without a quick recovery, the stock is likely to continue its downtrend. We can see from the chart that the stock will slide further after making a new low.


Chart 2: MEGB's weekly chart as at Nov 30, 2012  (Source: Tradesignum)

Conclusion

Based on bearish technical outlook, poor financial performance & no prospect of a quick turnaround, MEGB is a stock to be avoided.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MEGB.

2 comments:

Mat Cendana said...

The common assumption used to be "Education is a good field to invest in". This is true. But then, ANY field is good as long as that particular company is doing well and has potential future growth.

Masterskill had seen the good days but now is facing a downtrend both in its core business and its share price. Earlier this year, it was "the poor man's education counter" - favoured by speculators who thought some of SEGI's fortunes would rub on MEGB too. But now it's being shunned by all and sundry.

However, it is well worth watching for the patient investor because there might be potential capital gain from future developments. For one thing, some party might want to take over from the present major shareholders. They might be new to the field and MEGB's existing infrastructure and manpower mean they wouldn't have to start from scratch. Then there are those education-based companies that might want to expand and MEGB looks attractive enough to include in their stable.

Alex Lu said...

Hi Mat Cendana,

You may have a point here. After all, MEGB is trading at half its NTA. It is attractive enough for a better managed educational group to swoop in & buy up the company.