KUCHING: The education sector is slated to stay sluggish due to the lack of near-term re-rating catalysts and muted impact from the Malaysia Education Blueprint (MEB) 2013 to 2025 as well as the goods and services tax (GST).
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the government recently introduced the MEB in hopes of bringing major improvements in the country’s education system.
The main objective of the long-term MEB are understanding the current performance and challenges of Malaysia’s education system; establishing a clear vision for the education system as a whole over the next 13 years; and outlining a comprehensive transformation programme for the system, including key changes to the Ministry.
“However, we believe the impact are minimal in the short and medium term as the policy is mainly focus on raising the education quality for both teachers and students in the primary and secondary level,” it explained.
Apart from the MEB, Kenanga Research also expected to see muted impact from the GST.
“In principle, the GST is imposed on all goods and services produced in the country including imports,” it explained. “However, in order not to burden the lower income group, certain basic foodstuff and essential services such as private education are not subject to GST, according to Royal Malaysian Customs Department.
“Hence, we believe that the potential GST implementation may only have a muted impact on the education industry and hence stocks under our coverage such as HELP University and SEG International.”
Nonetheless, in the long-term, the research house believe the education sector may potentially undergo a challenging period as the drastic rising public cost of living post-GST may somewhat indirectly influence the market to look for cheaper education options such as distance learning programmes.
Similar to last year, the research house believed the government would continue to focus on strengthening education and human capital development in the upcoming 2014 budget, in line with the official launch of MEB recently.
On another note, HELP indicated that they have received 350 applications for the first batch for its international school, which is scheduled to commence classes in January 2014.
“As the number of students came in above our earlier conservative assumption of 250 students, there is a possibility for an upwards revision to our current earnings forecast of RM10.6 million (including registration fees).”
Meanwhile, should the GST implementation be effective from CY15 onwards, there could be a potential impact to the international school enrolment in view of the rising living-cost environment.
Nevertheless, HELP, being one of the more affordable international school institutes in the country, could potentially benefit at the expense of rivals which charges much higher tuition fees and related-costs.
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