In an announcement to Bursa Malaysia yesterday, the education group said its board believed the dividend payout was within the group’s financial capability considering its future earnings growth, adding that it had consistently paid dividends to its shareholders since its listing in 1995.
“The dividend policy aims to demonstrate to shareholders and potential investors the group’s commitment to reward its shareholders with consistent returns in line with the earnings growth of the group,” it said.
The announcement of the dividend policy came on the heels of SEGi’s managing director Datuk Clement Hii raising his shareholding to 32.44% from barely 0.81% when he was at the helm of Star Publications (M) Bhd last year.
Hii was executive deputy chairman of Star for two years from 2008.
He is now the single largest shareholder of SEGi, whose earnings have been on a strong growth path in the past four years.
For FY10 ended Dec 31, the education group posted a net profit of RM43 million, quadrupled from RM10 million in FY09. Revenue rose 31% to RM217.6 million from RM166.3 million previously. It announced in January a gross special dividend of 14 sen per share.
The education group has the financial capability to honour its proposed 50% dividend payout, says its directors.
Kenanga Research had earlier this year predicted that SEGi was likely to pay half its profits as dividends due to strong operating cashflow, less planned capex going forward and its low financial gearing position.
“This will translate into gross dividend per share (DPS), ranging from 16 sen to 23.2 sen in FY11 to FY13,” it said in a note in January. “We estimate the group could pay out as much as 90% of its net profit, including the recently-announced special dividend, as dividends in FY10,” the stockbroker added.
Based on Kenanga’s estimated dividends and yesterday’s closing price of RM3.46, the stock would offer a gross dividend yield of between 4.6% and 6.7% for FY11-FY13.
The research house had also pointed out that SEGi had on average been paying 24% of its profit as net dividends.
The firm rally on SEGi’s share price has boosted its market capitalisation of less than RM100 million a year ago to RM889 million based on yesterday’s closing of RM3.46.
SEGi share price had climbed from below RM1 in January last year to a historical high of RM3.60 early this month before it retreated to RM3.46 yesterday.
In a separate announcement, SEGi said it intended to seek shareholder approval at its upcoming AGM for a renewal of authorisation to carry out a share buy-back, adding that a circular to shareholders would be dispatched in due course.
This article appeared in The Edge Financial Daily, March 25, 2011.
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