MASTERSKILL - Probably not worth the IPO price?

I have been looking around for alternative comments regarding the new IPO wannabe - Masterskill - in Malaysia but have not found any worth reading.

A month ago since, I've already been preempted that the market is already buzzing with Masterskill going IPO - especially CIMB (as they are the ones who are going to carry the company - of course they are supposed to say good things - and also probably they are starting to believe their own bullshit). Masterskill is the country's largest operator of private nursing college in Malaysia.

Here I am probably going to be a few who are probably going to have a negative view of this company based on following points:

- first dangerpoint in an investment - over reliance on government - 95+ percent of its students are PTPTN backed. (For those who do not know, PTPTN is a government aid to students who are pursuing tertiary education.) I am presuming that PTPTN is assisting Masterskill a lot in terms of attracting students from rural areas. These students do not have to pay from their own pockets during the tenure of their studies. But what they do not really get is that they have to repay the loan after their studies.

- The course itself is not cheap (Masterskill is charging some RM60k per student inclusive of fees, accommodation - from my calculation of revenue of RM290 million / 15,000 students which comes to RM19,333 per year hence for a 3-year course it comes to RM60k) - think of newly graduated nurses that do not earn that high to pay their loans after they graduate. It seems that to be a nurse, the tuition fees are not cheap. My source from one of the largest private hospital chain in Malaysia informed me that starting salary for their nurses is between RM1200 and they can only probably earn RM1900 with all allowances and OT inclusive.

- for a similar fee of RM40k-45k for the entire course, a student in Malaysia can probably obtain a better degree (but this of course may not necessarily obtain the loan assistance from government).

- with a PE multiple of assuming 13x - 14.5x (this is what Masterskill is asking for hence valuation is above RM1.4 billion) and PAT (2009) of RM97 million it is already going to be almost simlar in size compared to KPJ? KPJ (at current market value of RM1.55 billion) is an established private hospital group with various income stream. It does not have to rely on a single income stream unlike Masterskill - how is Masterskill supposed to be as big as KPJ in terms of market valuation? This is a little mind-boggling.

- HELP and SEGi are both currently valued at RM220 - 230 million each in the market, Masterskill is valuing itself more than RM1.4 billion? Although one may say that PE wise it can be fairly valued as against these two companies, but for how long can Masterskill maintain its momentum? Is this company one of those who has a business model that rides on the sudden surge of need as well as with a little help from Government of Malaysia, they manage to achieve certain successes for only a short period? But in the long run, will its business model that relies on PTPTN (i.e. government loans to students) sustain?

- the CEO has mentioned that they are targeting overseas expansion. I am a bit apprehensive as its business which relies on loan to local students, how much can they attract foreign students this way.

I think their asking price is way too expensive, but I may not be surprise that the take up rate can be good as they seem to market this particular IPO well, and judging from the market's excitement over Masterskill due to their story line as well as growth, the market can be excited but not me.

I would love to see how well they will do 3 years down the road. Will they be another GPacket or many other companies in Malaysia that has a loud IPO but fizzle out on its performance over time?

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Update: 20 April 2012
Well! This stock is a big time failure! Dropping from RM3.50 during IPO to now RM1.16. I probably was overly careful in my analysis. If you remember, many analysts (professionals?) were giving a positive call on this stock.

Serious Investing!