A more difficult private universities environment

The downturn in international students’ intake has hit the private universities’ revenue and profits hard

by NUR HANANI AZMAN / Pic Source: University of Nottingham Malaysia Facebook

BOUSTEAD Holdings Bhd’s move to sell its substantial interest in University of Nottingham Malaysia (UNM) for RM137 million to the University of Nottingham, UK, reflects how difficult the higher education institutions environment in Malaysia is and shows the franchise models have failed to deliver what they promised.

Malaysia University of Science and Technology professor Dr Geoffrey Williams said the downturn in international students’ intake in particular has hit the franchise campuses revenue and profits hard.

Williams, who is also Williams Business Consultancy Sdn Bhd director, said the UNM franchise was valued at RM500 million as at December 2020 and has been sold in what looks like a fire sale for less than 30% of its valuation.

“Since it’s not a core activity for Boustead, they don’t want to subsidise it. Boustead has been restructuring but in doing so it keeps viable segments and off-loads non-viable sectors.

“I think it will be hard for Nottingham in the UK to persuade people there to bail it out long-term because the foreign branches are not popular among UK academics especially if they drain money,” he told The Malaysian Reserve.

Boustead stated that the RM137 million sale amount was for its 66.41% stake in the educational venture and its campus in Semenyih, Selangor.

The sale is part of Boustead’s strategy to rationalise its non-strategic assets, as well as accelerating the group’s performance by capitalising on emerging opportunities for value creation within existing core businesses.

UNM is a private university branch campus of the University of Nottingham and the first campus of a British university in Malaysia. Boustead has been the majority shareholder of UNM since its campus establishment in 2000.

Industry observers believed many educational franchise models with their own campus will face tough competition especially where local universities successfully carry out twinning programmes.

Apart from the right ecosystem, understanding the local geography is also essential for a franchise unit to survive especially once the hype is over.

Williams stressed that the main failure is the claim that “You get an international education” at the franchise campus.

“Although presented as foreign university, they are actually local university with a local licence, largely local staff and subject to local regulations, there are many better Malaysian universities to choose from with world-class credentials and partners.

“The ventures don’t offer the same as in their home country. The curriculum may be similar or ‘equivalent’ but the student experience is very different on campus and in class. It is not so different from other Malaysian university,” he added.

From his discussion with many foreign students, they look at QS ratings very closely and the foreign campuses are not part of that because it refers to the home campuses.

He said many local universities are now ‘5 Stars’ in QS and so that really matters.

“The issue now is this a sign of the downturn we discussed in the past? Is it a signal that other foreign universities might be in trouble? What are the causes other than Covid-19? What could they do? Should the Ministry of Higher Education do something or not?

“Now online degrees are less expensive so as people shift to online and blended revenues will fall even further making traditional campuses less cost effective. So long-term the outlook is not positive,” he concluded.