Kenanga Research is cautious on SEG International Bhd's (SEGi) outlook, saying its first quarter net profit of RM1 million was way below expectations.

"We believe that the group is still struggling to recover from the loss of a large number of its graduating students, which was supposed to be filled by new recruitments of foreign students, but it has been dragged by the new regulations set by the government," Kenanga said in a note.

Year-on-year, the company's 2013 first quarter revenue of RM55.8 million was down by 28 per cent due to the dismal intake coupled with a higher number of graduating students from its nursing programme.

Going forward, the escalating competition in the private higher education space will provide an additional challenge to the group, Kenanga said.

It has downgraded SEGi's rating to "underperform" with a target price of RM1.45, from RM1.75.

Meanwhile, another research house, RHB Research, has maintained its "sell" call on the company with a lower target price of RM0.96 from RM1.20.

"The disappointing results echo our concern that SEGi is breaking under the weight of rising competition given the status upgrades of several existing tertiary institutions.

"Thus, we continue to anticipate a difficult 2013 first half financial year due to sub-par student enrolment numbers, and remain cautious on its near-term earnings growth," it said.