CIMB Research downgrades Masterskill to Neutral, slashes EPS

KUALA LUMPUR: CIMB Equities Research has downgraded Masterskill Education Group Bhd (MEGB) from Outperform to Neutral, reducing its target price and also slashing its earnings per share (EPS) forecast.

It said on Monday, Aug 29 Masterskill’s annualised 1H11 core net profit was a letdown, coming in at 43% below its forecast and 40% below consensus because of poor student numbers and a 10.8 percentage points shortfall in EBITDA margin due to surprisingly high operating costs.

“The 44% year-on-year plunge in net student intake was a negative surprise and should be equally weak in 2H. In the medium term, student intake prospects are unexciting and margins will be under pressure,” it said.

CIMB Research also slashed its FY11-FY13 EPS forecasts by 43%-45% and dividends per share (DPS) forecasts by 53%-54%.

The research house also said it had cut the target price from RM3.48 to RM1.71 as it raised its discount to the 14.5 times market P/E from 30% to 40%, which lowered its target CY12 price-to-earnings from 10.2 times to 8.7 times.

“Our rating is downgraded from Outperform to NEUTRAL. The stock’s sole attraction is its dividend yield of 5%-7%,” it said