For QE31/12/2014, MEGB reported a net loss of RM39.9 million on the back of a revenue of RM7.2 million. The net loss was attributable to the impairment of assets & trade receivables amounting to RM9.2 million & RM 13.2million respectively and fee waiver recognized in the current quarter and a gain on Hong Kong investment disposal was realized in the preceding quarter. If you exclude the exceptional gain from disposal of HK investment in QE30/9/2014, MEGB has been a loss-making concern since QE31/12/2011.
Table 1: MEGB's last 8 quarterly results
Chart 1: MEGB's last 23 quarterly results
Valuation
MEGB (closed at RM0.66 last Friday) is now trading at a PB ratio of 1.27X. PER is not available as the company is a loss-making concern. The current price is 10% higher than the price paid by the new shareholders, Creador 11 LLC & SMRT to acquire a stake of 30.75% in MEGB. This acquisition will raise Creador 11 LLC's stake to 27.02% while SMRT (an educational group) will take a 23%-stake in MEGB. The new shareholders planned to revamp the company to return it to profitability.
Technical Outlook
On the news of the arrival of new shareholders & management, MEGB's share price has finally broken above its downtrend line. The new management team, led by the SMRT CEO Dr Palan, will certainly face a tough task of turnaround MEGB. I expect the share price to test the horizontal support at RM0.65 & possibly RM0.55 before the long road to recovery can begin.
Chart 2: MEGB's weekly chart as at Feb 2, 2015 (Source: ShareInvestor.com)
Conclusion
Based on new management, I would rate MEGB a HOLD. The record of investment success by the Creador team could work its magic again.
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.
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