Masterskill Education Group Bhd
AMID weak sentiment for the broader market, Masterskill Education Group Bhd (MEGB) is back in the spotlight with both trading volume and share price registering sharp spikes. The stock attracted an Unusual Market Activity (UMA) query from Bursa Malaysia.

Earlier this month, SMRT Holdings partnered private equity firm, Creador II LLC, to make a buyout offer for MEGB at 60 sen per share — subject to a 30-day period due diligence. MEGB’s current single largest shareholder, Siva Kumar, has committed to sell his 32.9% stake.

Creador, founded by Brahmal Vasudevan (who is known to be a shrewd investor) already has a 19.3% stake in MEGB. He also owns 6.18% of SMRT. Added to Siva Kumar’s holdings, this will trigger a mandatory general offer for the remaining shares in MEGB. SMRT and Creador intend to maintain the listing status of MEGB.

Primarily involved in the provision of higher education and training, MEGB is a leading provider of nursing and allied health education in Malaysia. The education provider operates two associate institutions, namely Asia Metropolitan University (AMU) and Masterskill Global College.

MEGB’s fundamentals have deteriorated significantly since its IPO (which was priced at RM3.80). Turnover slumped from RM315.7 million in 2010 to RM47.8 million in 2013. The company fell into the red in 2012 with pre-tax loss of RM26.1 million, which worsened to RM125.0 million in 2013, including RM127 million assets impairment.

Its balance sheet deteriorated from net cash of RM99.4 million to net debt of RM2.3 million while shareholders’ equity more than halved to RM254.2 million from 2010 to 2013.

Given that the stock is now trading 24% above the buyout offer, there appears high expectation for a successful turnaround. Investors should bear in mind though that it may take some time to turn around the ailing business.

This article first appeared in The Edge Financial Daily, on November 25, 2014.