'Subscribe' to MT Educare with long term view: Nirmal Bang

MUMBAI: Nirmal Bang has advised investors with long term view to ‘Subscribe’ to the initial public offering of MT Educare. The valuation looks expensive as compared to peers and investors may not enjoy listing gains, it says.

“At the given price band of Rs 74-80, on a post equity basis, the issue is 16.7x & 18.1x FY12E EPS of Rs 4.42. We have factored in lower numbers for Q4FY12 for MT Educare which is seasonal for the company.

On P/E basis valuations looks expensive as compared to Career Point which on an annualized FY12E earnings is trading at 12x. This is mainly on account of higher other income Career Point earns.

However on EV/EBIDTA, EV/Sales and Fixed Asset Turnover Ratio basis, MT Educare’s pricing seems reasonable. We recommend Subscribing the issue with a long term view, though it may not have listing gains,” the note said.

CRISIL has assigned a ‘Grade 4/5’ to the MT Educare IPO which indicates that the fundamentals of the issue are above average relative to other listed securities in India.

The company has entered the primary market to issue shares of face value Rs 10 each in the price band of Rs 74-80 per share.

The issue consists of fresh issue by MT Educare and offer for sale by Helix Investments. The net proceeds from the fresh issue would be utilised for part financing the cost of construction of a pre-university college campus (PUC) in Mangalore, Karnataka, establishing coaching centres at new locations and for general corporate purpose.

The issue closes Thursday.