MASTERSKILL Education Group Bhd (MEGB) is on the radar of a group of investors keen to buy out the company, including major shareholder Siva Kumar’s 32.88% stake, sources say.
The new buyers are said to be a group of investors who have experience in running education businesses.
MEGB shares have been actively traded over the last few weeks, shooting up by 5 sen or 10% this week alone to close at 54 sen, its highest in six months.
Notably, some developments at MEGB point to it being poised for a takeover, whether friendly or hostile.
On Sept 18, MEGB’s second largest shareholder, Crescent Group, sold out its remaining block of shares into the market, which in turn had depressed MEGB’s shares to hit a low of 34 sen.
This leaves only Siva as a major shareholder to contend with.
Interestingly, just three days ago Siva announced his intention to trade in his MEGB shares during the close period prior to the release of the company’s third quarter results.
Siva, who declined to comment for this article, had bought into MEGB in 2011.
In March this year, he had entered into an agreement with Hong Kong based businessman, Gary How Soong Khong for the latter to buyout Siva’s stake in MEGB. However the deal failed to materialise and the agreement was mutually terminated.
To recall, How agreed to acquire a 29.76% stake in Masterskill from Siva at RM1.10 apiece. The agreement allowed How until Sept 18 to exercise the option to acquire Siva’s then entire 122 million shares in the company for RM134.2mil cash, while Siva had a put option to sell his shares to How between Dec 18, 2014 and Jan 18, 2015 at RM1.10 each. However, on Sept 17 the agreement was mutually terminated.
In a recent interview with a business daily, Siva has also said that he was in talks with potential partners to turn around the education group, including Temasek Holdings Private Ltd and Barings Private Equity.
However, it isn’t clear if these are the parties that are close to making the offer for MEGB.
Despite not being able to turnaround its ailing education business, MEGB remains a relatively healthy company.
Its latest published net tangible asset (NTA) is 59 sen, a slight premium to its current share price of 54 sen.
Chain of restaurants
MEGB also recently disposed its entire equity interest of 118 million shares in Hong Kong-based Gayety Holdings Ltd, a company that operates a chain of restaurants in that country, for RM33.24mil.
MEGB also has cash of some RM14.3mil.
Hence this total of RM47.5mil, is slightly more than its entire debt position of RM42.1mil, putting it in a small net cash position of about RM5mil.
What is also valuable in MEGB is its real estate properties.
The company has buildings and land in Cheras, Ipoh, Kota Baru, Johor Bharu, Kota Kinabalu and Kuching.
The land on its flagship campus in Cheras alone has a combined net book value of some RM20.7mil.
Taken together, its entire properties had a combined net book value of some RM196mil as at Dec 31, 2013.
MEGB which was listed in 2010, has been a poor performing company, both from its earnings and stock price performances. Investors who had bought into the initial public offerings (IPO) at a price of RM3.80 per share, have suffered massive losses.
It is showing some improvement in earnings. In the first six months to June 30, 2014, MEGB posted a net loss of RM9.8mil against a net loss RM30.4mil a year ago. Its revenue was sharply lower at RM22.5mil compared with RM35.9mil previously.
At its height, Masterskill recorded a net profit of RM102.1mil on revenue of RM315.7mil for its financial year ended Dec 31, 2010.
MEGB then at its heights had some 14,000 students and the numbers had since dwindled to about 4,000 students as of early this year.
The reduction in National Higher Education Fund Corp (PTPTN) loans amount and the higher entry requirement for the nursing programme resulted in lower student enrolments.
To curb the rising number of borrowers and defaulters, PTPTN had lowered its maximum loan for eligible diploma students to RM45,000 from RM60,000, forcing Masterskill to reduce its tuition fees.
Siva Kumar, a former investment banker, first surfaced as a substantial shareholder in MEGB in early October, 2011 with a 10% stake. MEGB’s price was then around RM1.10 per share.
MEGB’s founder Datuk Seri Edmund Santhara had sold down his shares and resigned as chief executive officer from the company in 2013.
There have been reports of a takeover of MEGB before, the last being Hong Kong’s How.
Previously also, there were reports that MEGB was trying to turn itself around by divesting its properties to raise funds to revive its ailing business.
Insiders say that MEGB could not proceed with its asset sales because it couldn’t achieve a good price of buildings in which its campuses were located.
That was simply because any sale would have had to have a sale and leaseback agreement in order for the campus to continue its operations. However with the business declining, buyers shied away from striking any sale and leaseback with MEGB, on concerns that the school would find it hard to make on its lease payments going forward.
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