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Will KPJ pose a threat to Masterskill?

Masterskill Education Group Bhd, the country’s largest provider of healthcare and nursing education, now has to contend with a new competitor in the form of KPJ Healthcare Bhd, the largest private h


erns that the local health sciences sector is becoming more saturated, analysts are still positive on the sector’s outlook.

"We believe there is plenty of headroom for growth in the health science education sector given the shortage of registered nurses in Malaysia, especially with the government’s targeted ratio of one registered nurse to 200 population by 2020," an analyst with RHB Research Institute told The Edge Financial Daily.

The analyst also said with higher government requirements on entry into nursing programmes, this would increase the competitiveness of the major industry players.

Furthermore, there is increasing awareness of nursing and health sciences programmes, due to rising demand for healthcare services with medical advances and the longer average lifespan in Malaysia.

It remains to be seen how much Masterskill will be affected by KPJ’s entry into its turf and the strategies both will employ to grow their own market share.

KUALA LUMPUR: As KPJ Healthcare Bhd’s KPJ University College (KPJIUC) starts moving onto Masterskill Education Group Bhd’s turf, there is rising concern the overall student pie may no longer be expanding.

Interest from local students in diploma programmes offered by local private institutions is on the decline, recent statistics from the Ministry of Higher Education (MoHE) have shown, a trend that may spell challenging days ahead for local private institutions like Masterskill and KPJIUC to grow their student base.

"The smaller pool of students pursuing diploma programmes in private institutions could affect niche education players like Masterskill, as more than 95% of its students are currently enrolled in diploma programmes, mostly specialising in nursing and allied health courses," HwangDBS Vickers Research said in a report on Aug 5. This could also mean worries for other local health science institutions such as KPJIUC, which is rapidly expanding (See related story).

The number of diploma-level students has declined from a peak of 98,000 in 2009 to 92,000 in 2010, while student intake into diploma programmes by private institutions dropped from a high of 91,000 in 2008 to 54,000 in 2010, the report said, citing MoHE data.

There has been an increasing tendency for students to choose degree courses over diploma programmes as their academic results improve and more university places are made available. Reflecting this shift, diploma students as a percentage of total intake by both public and private institutions have shrunk from 30.4% in 2009 to 28.1% in 2010, while the proportion of degree students rose from 41% in 2009 to 42% in 2010.

"The proportion of student intake at the diploma level has fallen from 33% six years ago to 28% last year.  Within this student group, fewer opted to study in local private institutions as the mix of new diploma-level students in private and public education institutions has decreased from 70:30 six years ago to 58:42 last year," said the Hwang DBS report.

Several factors led to the decline in numbers of diploma seeking students, it added.For one, the entry requirements into the nursing programme have been toughened, trimming the research house’s assumptions on new student intake into

Masterskill to 6,500 in from 7,200 in FY11, 7,300 from 8,100 in FY12 and 8,100 from 8,700 in FY13. In addition, entry requirements into the STPM route have been loosened, according to Hwang DBS’ report. That caused enrolment in local private education providers to decline even when the number of degree seeking students had increased overall from 194,000 in 2005 to 328,000 in 2010.

The decline in numbers is said to have already taken place last year when the total intake of diploma-level students in the health, health sciences and welfare field by private higher education institutions declined to 30,000 in 2010 from 38,000 in 2009.

HwangDBS expects Masterskill to counter this decline by stepping up its student recruitment drives, offering more degree programmes, including in new courses and through strategic alliances, and venturing overseas to diversify its income streams.

The government’s decision in June 2011 to tighten PTPTN loan funding limits has also put a damper on the number of students seeking diploma courses at private institutions, with the maximum loan now reduced to RM15,000 per year for diploma courses at all private higher education institutions.

HwangDBS, however, maintains its view that "the government would continue to offer financial support via PTPTN to increase the education levels in the country, even as it strives to tackle the poor repayment record by PTPTN borrowers by taking initiatives such as planning to pass a law for the tax authority to automatically deduct a portion of their salary as loan instalments".

On Aug 29, however, Hwang-DBS downgraded Masterskill to "fully valued" from "buy" and