Will KPJ pose a threat to Masterskill?

KUALA LUMPUR: Masterskill Education Group Bhd, the country’s largest provider of healthcare and nursing education, now has to contend with a new competitor in the form of KPJ Healthcare Bhd, the largest private hospital operator.

On July 25, KPJ’s education subsidiary, KPJ International College of Nursing and Health Sciences (KPJIUC), attained university college status from the Ministry of Higher Education (MoHE), giving it a boost in academic standing and the ability to grant its own degrees. At the award ceremony, KPJ announced that it plans to invest RM120 million in the physical expansion of its Nilai campus and aims to see a student enrolment of 10,000 by 2015.

“We hope to acquire the status of a full-fledged university by 2016,” said Datin Siti Sa’diah Sheikh Bakir, managing director of KPJ.
Under Santhara’s leadership, Masterskill is venturing into Indonesia where it will teach and train PT Sejahteraraya Anugrahjaya’s students at the Mayapada Hospital in Tangerang.

KPJ is ambitious and confident about entering the playing field and there are good reasons for Masterskill to be wary of KPJ.

As the country’s largest private healthcare player, KPJ has a large infrastructure of hospitals, doctors and nursing staff which can support its courses, provide its students on-the-job training, and give them future employment opportunities.

Masterskill is a pure education player with no hospitals. Still, analysts are positive on Masterskill’s future performance, saying that the group has “significantly better economies of scale” than KPJIUC.

It is noteworthy that Masterskill’s current revenue base is about 10 times higher than KPJIUC’s, while its student base is over seven times larger than KPJIUC’s.

In FY10, Masterskill’s revenue was a strong RM315.7 million from a student population of over 18,300. KPJIUC, on the other hand, saw revenue of over RM30 million from a student base of 2,500 for the same year.

However, KPJIUC has ambitious plans.
Siti says KPJIUC hopes to acquire the status of a full-fledged university by 2016.

“We expect to see revenue of approximately RM40 million this year and RM100 million once Phase 2 of our expansion completes at end-2012,” said Mohd Helmi Daud, KPJIUC operations manager.

Phase 2 refers to the second of the group’s three-phase, RM120 million physical expansion of its Nilai campus.

Both companies have varying strategies to attract students.

According to Helmi, 20% of KPJ’s students are funded by the group and thus bonded to serve with the healthcare provider. This secures the student’s future with a job, and KPJ with a steady supply of quality new staff.

Meanwhile, 95% of Masterskill’s students subscribe to PTPTN (the National Higher Education Fund Corp). Fears of a cutback in government funding for the education scheme caused a major selloff of Masterskill shares last year.

When it comes to practical training, KPJIUC has the advantage of various KPJ hospitals to send its students to. KPJ has a large network of 20 hospitals in Malaysia and two in Indonesia.

Masterskill, on the other hand, depends on an arrangement with public hospitals.

On July 1 this year, Masterskill entered into a 15-year agreement with the government for the use of its hospitals and community polyclinics, at a cost of RM120 for each student per session for the usage of the facilities.

With an enrolment of over 18,300 students, this will take quite a bite out of Masterskill’s revenue.

With its roots in healthcare, the KPJ group sees healthcare education as a synergistic and natural extension of its core business.

While KPJIUC continues to expand and strengthen its health sciences education sector with new programmes, including a medical programme, it is capitalising on the strength of its hospitals, with priority to be given to post basic programmes, especially in nursing.

Masterskill, on the other hand, is looking to diversify its programmes out of healthcare. In April 2011, the group entered into an agreement with The University of Newcastle, Australia, for Masterskill to provide twinning programmes for Bachelor of Business and Bachelor of Commerce degrees to its students.

“Masterskill has plans to introduce new non-health science courses such as business and hospitality [and there is a] possibility of building a private school on its Bandar Baru Bangi campus,” RHB Research Institute said in a report last month.

Both groups also have overseas expansion plans in the pipeline.

In April this year, Masterskill group CEO Datuk Seri Edmund Santhara signed an MoU on behalf of its unit Masterskill (M) Sdn Bhd with Indonesian listed PT Sejahteraraya Anugrahjaya (PTSA) to teach and train its students at the Mayapada Hospital in Tangerang, Indonesia, as well as to establish a university in Indonesia in the future.

Helmi, meanwhile, disclosed that KPJIUC is also in talks with overseas partners, saying that his university college is exploring a “potential tie-up with overseas institutions in Yemen and India, especially for post basic training venues for specific courses such as midwifery”.

Despite concerns that the local health sciences sector is becoming more saturated, analysts are still positive on the sector’s outlook.

“We believe there is plenty of headroom for growth in the health science education sector given the shortage of registered nurses in Malaysia, especially with the government’s targeted ratio of one registered nurse to 200 population by 2020,” an analyst with RHB Research Institute told The Edge Financial Daily.

The analyst also said with higher government requirements on entry into nursing programmes, this would increase the competitiveness of the major industry players.

Furthermore, there is increasing awareness of nursing and health sciences programmes, due to rising demand for healthcare services with medical advances and the longer average lifespan in Malaysia.

It remains to be seen how much Masterskill will be affected by KPJ’s entry into its turf and the strategies both will employ to grow their own market share.