MEGB ... May12

It is likely to reward its shareholders with a bumper dividend from the balance of its unutilized funds raised from its IPO in 2010.

The comes as the education group sees a change in strategy following a drop in its student numbers due to intense competition and issues related to the PTPTN.

From its IPO, MEGB raised gross proceeds of rm147.86 million. At the time, a large sum was set aside to build a campus in Kajang, but as at Dec 31, 2011, it had only utilized RM70 million.

As at 4QFY2011 results, tm38.8 million was spent on the purchase of land to build the new campus, while rm20 million was spent on expanding its existing campuses. After stripping out, the listing expenses and working capital, there is about rm73.66 million remaining from the IPO proceeds.

Meanwhile, it is said that the education is not averse to selling the land it acquired to build the campus. After there is no need for a big campus anymore now.

The rm73.66 million coupled with the sale of land – should it happen – could bring in about rm112 million which can then be distributed to shareholders, which is about rm0.27 per share.

MEGB is facing a number of challengers: about 90% of it students rely on loans from PTPTN to finance their studies. The government has also decided to increase the minimum entry requirement for nursing courses and PTPTN became more stringent with its loan approvals because of poor repayments.

There has also been a shift in the industry, with fewer students pursuing diploma courses at private education institutions.

Expect high earnings risk for MEGB as the group tries to attract new students by diversifying into non health related programmes and post diploma courses.

It will work towards establishing a reputable foreign branch campus in Malaysia. It also plans to focus on degree programmes where there is higher demand and revenue orientation, instead of diploma programmes.

MEGB also said that the new PTPTN loan scheme had impacted its environment and earnings.

However, there is a silver lining for the education group. The ministry has been tough on granting licenses for the setting up of colleges. With that, MEGB’s licenses and business has a value.