PETALING JAYA: SEG International Bhd (SEGi) will continue to focus on conducting more high margin programmes, recruiting more international students and strengthen its brand.
Group managing director Datuk Clement Hii said SEGi was previously running many low margin programmes.
He added that there was no foundation for sustainable growth due to the lack of niche areas which its various campuses were involved in.
“The number of international students was also low as there was little concentration placed on the recruitment of these students. It took us several years to address all these issues, and we are now on the verge of an aggressive harvest,” he told StarBiz.
He said the group would continue to introduce new high margin programmes in the next few years, adding that many of the new courses had high barriers of entry as the cost of setting up the facilities was very high and the approvals from the relevant bodies were stringent.
“Given the financial and academic strength of SEGi, it is able to sustain continuous growth in the number of students and consequently profits. We will also continue to strengthen the SEGi brand,” he said.
Hii pointed out that less than 10% of SEGi's student population currently was international students but the group believed that the recruitment of international students would be one of its key growth strategies in the coming years.
“We have a dedicated international marketing team who will concentrate on setting up overseas collaborations for the recruitment of international students to SEGi,” he said.
On its new campus in Perak, Hii said the group expected the branch campus to be fully operational within the next two to three years.
“Perak is a potential growth area for private higher education providers. We will be working closely with the Perak state government to ensure that tertiary education will be brought to a higher level,” he said.
Kenanga Research said although the profitability of the group was relatively low historically, it believed the worst was over for the group following its rebranding exercise and corporate consolidation between financial year ended Dec 31, 2006 (FY06) and FY09.
“With the recent upgrade to University college in 2008, the group is able to take on more students and to roll out higher margin programmes that should translate into better profitability. This can be clearly seen from the significant jump in revenue and net profit of the group since first quarter of FY10,” it said in a report.
Apart from building a new campus in Perak, the research house said SEGi had plenty of room to increase its capacity without any needs for additional capital expenditure.
“The group is also actively looking for collaborations with well-regarded foreign universities to offer more choice of courses. Apart from full-time students, SEGi also plans to capture the part-time and adult-learning markets by introducing more part-time programmes and courses,” it said.
According to a recent report from JF Apex Securities Bhd, SEGi's balance sheet remained healthy and its shareholders fund grew by 14.5% year-on-year to RM193.8mil. It has a zero gearing ratio and a net cash position as at Sept 30, 2010.
“On Jan 13, 2011, the group declared a special gross dividend of 14 sen per share for FY11. On the back of its robust earnings outlook, we believe that SEGi should be able to pay out at least 10 sen dividend in FY11 (implying a payout ratio of 50%), which translates into 3.6% dividend yield,” the research house said.
However, SEGi could be adversely affected by a stronger ringgit due to a possible slowdown in demand for education from international students as they may opt to study in their home countries.
“The group's revenue is sensitive to growth in student enrolment. Although we are positive on the education industry given the Government's plan to develop Malaysia into a regional education hub under 10tn Malaysia Plan, there is no guarantee that this aim will be achieved,” the report said.
The group's performance would be affected if there was adverse changes in regulatory and government policy concerning the education industry such as accreditation requirements, international student intake requirements as well as Perbadanan Tabung Pendidikan Tinggi Nasional Malaysia loans eligibility, the report added.
An analyst told StarBiz that the strategy to develop its own courses would help to reduce its capital expenditure, adding that the strengthening of the ringgit would also help to bring down the cost of its overseas courses.
“The cost of higher education in Malaysia is still cheaper than Singapore, Australia, New Zealand, the United States as well as European countries. The strong ringgit would not really affect the demand for SEGi business,” he said.
The analyst did not foresee any major changes in the regulations and policies for the higher education industry.