Sunday, 1 December 2013

Masterskill: shocking loss and insufficient explanation

I wrote in my last posting about Masterskill:

"And 2013 will most likely be much worse than 2012.".

It looks like, unfortunately, that statement will be very true. The company announced its third quarter results:

The revenue compared to the third quarter of the 2012 is down a shocking 56%.

The Profit Before Tax was hit by a RM 88 million "impairment loss for goodwill and PPE".

The reasons for these can be found in the following paragraph:

"13. Review of Performance 
For the third quarter ended 30 September 2013, Masterskill Education Group Berhad
(MEGB) recorded a revenue and loss before tax of approximately RM15.6 million and
RM104.4 million respectively. Revenue was 56% lower than last year’s quarter due to
lower student population as a result of graduating students and low intake numbers.

The higher loss before tax was largely due to provision for impairment loss on
goodwill and certain of the Group’s property, plant and equipment totalling RM88.2

I think investors of Masterskill deserve a much more detailed explanation than the above:

  • Students graduating: that happens every year.
  • The low intake numbers: the company should give some relevant background why numbers have come down so much.
  • The (hopefully one-off) provision, there needs to be much more detail, what exactly is written down and why.

The results of the last six years:

Year   Revenue   PAT
2008    203M     72M
2009    273M     97M
2010    316M    102M  <=== IPO
2011    250M     38M
2012    149M    -28M

2013     51M   -135M  (based on 9 months)

The worsening results of the company (both in revenue and profit), exactly after the IPO (when increased profits should be expected, due to the inflow of IPO funds) and the large write-off in the last quarter are very worrisome.

I hope that the authorities will consider starting a thorough investigation, if all the representations and warranties as submitted in the due diligence of the IPO and the financial accounts Pre-IPO were indeed correct.

On 31 Oct, 2013 the company announced that Dato' Sri Dr. Santhara Kumar A/L Ramanaidu [the founder, previously in charge and previously its largest shareholder]:

"has accomplished all the task assigned to him as a former Group Chief Executive Officer and Director and vacated the position for a woman board member to be appointed". 

Apparently a rising share price was not one of the tasks assigned to him:


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