Education sector likely to see diverging fortunes


PETALING JAYA: The education sector may see diverging fortunes ahead amid a potentially big change in industry hiring trends that is currently developing.

This could mean less of a need for higher education moving forward, but instead a higher demand for wholesome education at the primary and secondary school levels and relevant industrial training after that.

The Internet has democratised the ease of access to knowledge, training and education for the masses and this could sap demand for such education providers and those which do not have a strong brand name will likely be the first to be affected.

“With the exception of specialised industries which require accreditation such as engineering, medical, education and law; there are many other courses offered at universities and colleges today that may not necessarily cater to industry needs and demands at home,” an industry observer said.

Recently, a report by job search site Glassdoor noted that 15 major companies in the United States did not see the need for its employees to have a degree.

These companies included Google, Apple, IBM, Starbucks, Hilton and Ernst & Young.

“Academic qualifications will still be taken into account and indeed remain an important consideration when assessing candidates as a whole, but will no longer act as a barrier to getting a foot in the door,” Ernst and Young’s managing partner for talent Maggie Stilwell said in the report.

In Malaysia, several listed education providers will be closely watch should this trend develop into something that is more sustained among industries here.

Stocks which have exposures to this segment of higher education include Seg International Bhd , Paramount Corp Bhd, SMRT Holdings Bhd and Protasco Bhd .

The companies have some stakes in the provision of education: be it through private schools, universities or colleges.

Seg International owns SEGi University and Colleges that provides higher education services in various fields.

In its latest second quarter ended June 30, Seg had recorded flat revenue growth of RM65.55mil from the same quarter a year ago while net profit had risen to RM13.58mil from RM8.92mil a year ago.

It attributed the improvement in its bottom line mainly to its streamlining exercise where assets and resources were more efficiently utilised.

SMRT has its stake in the education sector through its 57% owned Minda Global Bhd that operates the Cyberjaya University College of Medical Sciences, Asia Metropolitan University, Asia Metropolitan Colleges and the Asia Metropolitan International School.

The company recorded a bigger net loss of RM5.86mil in its second quarter ended June 30 from a net loss of RM3.68mil a year ago in spite of revenues that rose about 10% to RM26.11mil.

According to the company in its Bursa Malaysia filing, bottom lines were weighed largely due to higher losses recognised under Asia Metropolitan University of 57% following the consolidation of Minda Global as compared to the previous 21% recorded.

Meanwhile, Protasco which is a diversified company owns the Infrastructure University Kuala Lumpur.

According to its annual report, the university had experienced a drop in student population in FY17 to 3,517 from 3,976 a year ago.

In its latest financial statements, the company reported a pre-tax loss of RM2.03mil for the second quarter ended June 30.

In the year-to-date period, the education segment had reported a pre-tax loss of RM3.59mil from a pre-tax profit of RM35,000 in the year-to date period a year ago.

It said in the notes to its financial statements that the education segment saw a decrease in both revenue and pre-tax profit due to low student enrolments.

“The student population at the end of the financial quarter decreased to 2,920 as compared with preceding year corresponding quarter of 3,594. The student intake is expected to improve in the November 2018 semester,” Protasco said in the notes to its financial statements.

Paramount has exposure in the education industry through the KDU brand: Sri KDU Schools, KDU College Petaling Jaya, KDU University College and the REAL Education Group.

In its latest reported second quarter, the company said that revenue of the education division was marginally higher at RM68.5mil from RM65mil in the same quarter a year ago.

The company said in its financial statements that the higher top line in this segment was mainly due to the higher student enrolment at KDU University College in Glenmarie.

It noted that quarterly pre-tax profit for the division was however lower at RM9.5mil compared with RM11.7mil in the second quarter of 2017.