HELP ... Apr10

HELP INTERNATIONAL CORP posted strong results for 1QE Jan 2010 due to its strong branding and rising demand for home-grown degrees and financial prudence measures taken during the recession.

EARNINGS SEASONAL
For 1QE Jan 2010, Revenue rose 12.7% YoY to RM23.5m. PBT increased by a robust and significant 63.4% YoY to RM3.8m. Net Profit doubled to RM2.4 million. HELP's earnings are seasonal due to intakes. Revenue and Profits are recognised according to the classes conducted for each student enrolled, rather than on a pro-rated basis across the year. As such, its earnings are traditionally weak for the first and third quarters for its FYE Oct each year. Earnings tend to be very strong in the second and fourth quarters (Feb-Apr and Aug-Oct) when classes are in full swing.

INCREASING STUDENT ENROLMENT
The growth in Turnover reflects increasing student enrolments and staggered fee increases. Profits and margins increased more significantly due to a higher proportion of students studying for home-grown degrees, ie those awarded under the 'HELP University College' banner, which reduced payments to external universities. PBT Margin expanded from 11% to 16% YoY.

STRONG BALANCE SHEET & CASH POSITION
HELP's Balance Sheet remains very strong. Despite paying an initial deposit of RM5m for the purchase of the HELP Residence hostel, its Net Cash position remained virtually unchanged over the last quarter.

Net Cash stood at RM87.2m in Jan 2010. This is equivalent to a significant 98 sen per share � or 48% of the current share price of RM2.03. The sum includes RM30.8 million for fees paid in advance, but excludes the RM20.3 million allocated for the purchase of land for its new campus in Subang 2, Sungei Buloh.

STRATEGIC ROAD MAP FOR DOUBLE DIGIT COMPOUNDED GROWTH
INSIDERASIA said in a report Apr 1, 2010 that HELP is on track for continued double-digit growth in FY2010-2011. The Company's Net Profit has grown a compounded 24% annually over the last four years and looks set to grow 20% annually in the next two years. The Company has a clearly mapped-out growth strategy over the next few years, which culminates in the setting up of its new flagship Subang 2 campus.

In the near-to-medium term, growth will be anchored by growing student numbers � both locally and abroad, the staggered impact of fee increases and the addition of its 'Fraser Business Park' campus. The education provider will also enjoy substantial cost savings from the recently proposed acquisition of 'HELP Residence', which will be fully realised in FY2011 (the acquisition is pending completion). HELP had proposed to buy the 'HELP Residence' building in Damansara Heights in Sep 2009 which is presently used as its hostel, for RM50 million cash, to be paid over a period of five years, with interest accrued at 4% p.a. on the unpaid balance. This works out to RM329 psf.

ACQUSITION OF HOSTEL IS POSITIVE EARNINGS-WISE
The acquisition is positive earnings-wise, as savings from rental will far outweigh interest costs. The current annual rental of RM4.1m for the hostel translates into a rental yield of 8.25% for the Vendor, as opposed to interest income of just 2% and the imputed interest rate of 4% for the staggered instalment payments. Thus, HELP could potentially save up to RM3.1m a year in FY2011, which is equivalent to 14% of its PBT in FY2009.

LONG TERM GROWTH TO FOCUS ON SUBANG 2 CAMPUS
The longer-term growth strategy will focus on the 23.3-acre Subang 2 integrated campus according to INSIDERASIA. This will elevate HELP into a full-fledged university, from its present status as a University College granted since 2004.

The new campus will also serve as a regional centre for its rising overseas student population. This includes those coming to Malaysia to study full-time, as well as those studying overseas for its degrees, most of which the last year is typically spent in Malaysia.

CURRENT STUDENT POPULATION AT 12,000
HELP's current student population is about 12,000 in Malaysia. It has over 1,000 students studying for HELP accredited courses overseas, in Vietnam, China and Indonesia. The majority are students enrolled in Vietnam National University.

OVERSEAS TWINNING PROGRAMS
The overseas ventures involve a "twinning" like arrangements with low risks and entry costs, but high international visibility and earnings potential. HELP provides software, syllabus, training, technical and academic support, without heavy investment in buildings or physical assets.

HELP is expanding its overseas base further, and is in the process of setting up new affiliations with a number of colleges in 2010, including four in Indonesia, 23 in China, one in Cambodia and likely another one in Vietnam, all of which will see students studying for HELP-accredited or twinning degrees.

These new tie-ups will help the company see a significant increase in overseas income from FY2011 onwards. It expects to see about 500-600 new overseas-based students in FY2010 and 1,200-1,600 the following year � in addition to the current base of over 1,000 students.

The new Subang 2 campus will alleviate accommodation and space constraints at its present Damansara campus, and allow for HELP to become a major regional education player.

HIGH COST OF OVERSEAS DEGREES
The rising � and very prohibitive � cost of overseas degrees, and HELP's strong branding and academic standing will continue to increase its student base and ability to increase fees in the future, especially for twinning degrees. This underscores the resilience of its earnings according to INSIDERASIA.

The research house added that HELP has a strong business model and brand name. The strong branding has helped to expand its student population base, extend its presence overseas and increase the appeal of its own home-grown degrees, which are gaining popularity � not just locally but also abroad.

STRONG EARNINGS & ATTRACTIVE VALUATIONS
INSIDERASIA, a licensed Investment Advisor expects Net Profit to rise 20% to RM18.5m for FYE Oct 2010 and 21% to RM22.4 million for FYE Oct 2011, with EPS of 20.8 sen and 25.2 sen, respectively.

The research house believes that the latest NTA of RM1.11 per share is severely understated. The Company's main fixed asset, the 11-storey Wisma HELP in Damansara Heights, is carried in its books at only RM32m just RM119 psf for the built-up space. Office building space of that quality is currently ranging from low forced sales values of RM150 psf in Petaling Jaya to new sales of around RM500 psf and more for slightly highly building quality in that vicinity.

VALUATIONS
INSIDERASIA is of the view that a conservative value of RM350 psf for Wisma HELP will give a value of RM94.2m bringing the value of the building and cash to RM181.4m or RM2.05 per share, around the current share price. This implies that investors are getting HELP's other assets, including the underlying business, valuable franchises and strong branding built up for the past 24 years, for effectively 'free'.

CAMPUS EXPANSION - STUDENT/SPACE RATIO
HELP's expansion will be anchored by two new campuses � Fraser Business Park and Subang 2. Due to delays in handover, the new campus at Fraser Business Park on Jalan Sungei Besi, Kuala Lumpur, will open in 4Q-CY2010 instead of May 2010. HELP will lease about 220,000 sq ft of space, which can accommodate up to 5,000 students or a student to space ratio of 44 sf per annum. The campus will cater largely for post-graduate, technical and vocational courses, including a wide range of new courses such as culinary, hospitality, performing arts, physiotherapy and others.

HELP-ICT (the former Sepang Institute of Technology acquired in Nov 2007 will also move from its Klang location to the Fraser Park campus. This will give the new campus an instant base of about 1,500 students and will further widen the appeal of HELP-ICT's engineering, vocational and medical courses, as they were previously limited by its location in Klang.

The longer-term expansion plans will centre on the flagship Subang 2 campus near Sungei Buloh. Located on 23.3 acres, the land was acquired for just RM20 psf or RM20.3m. The entire campus is expected to cost around RM100m, including land cost. HELP hopes to receive building approvals in 2010 and start building in 2011. The first phase, with 300,000 sq ft of built-up space will cost RM50m. This can be easily funded through annual cash flows.