Raffles Education

[winston]

Not vested anymore. Can somebody enlighten me on what's going on in this counter ?

The Board of Directors of Raffles Education Corporation Limited (the “Company”) refers to the Company’s Circular to Shareholders of the Company dated 11 February 2008 (the “Circular”) in relation to, among others, the proposed acquisition of Oriental University City Development Co., Ltd. (“Oriental University City”) in Langfang City, Hebei Province, the People’s Republic of China.

Unless otherwise defined, capitalised terms in this announcement shall have the same meanings as defined in the Circular. As stated in the Circular, the Aggregate Investment Amount of RMB 2 billion was payable in four (4) instalments over four (4) years of approximately RMB 500 million in each year from 2008 to 2011. The first instalment of RMB 500 million was settled before the end of 2008.

The Company had on 21 May 2009 entered into an agreement to adjust the time period for the payment of the balance of the Aggregate Investment Amount of RMB 1.5 billion (the “Adjustment Agreement”). According to the terms of the Adjustment Agreement, the Company will make payment as follows:
1. a payment of RMB 500 million no later than 30 April 2010;
2. a payment of RMB 105 million no later than 31 December 2010;
3. The balance amount of RMB 895 million shall be paid in full upon, inter alia, the recovery of the economy from the current global economic crisis. In any case, the Company shall make payment of RMB 500 million no later than 31 December 2012, and payment of the balance no later than 31 December 2013.

The Directors believe that this Adjustment Agreement will have a positive impact on the cash flow of the Company. It will also help in the development of Oriental University City and improve the return on this investment

[winston]

Not vested. From Kim Eng:-

Raffles Education – Company update (Pauline Lee, DID: 6432 1453)
Previous Day Closing price: $0.52
Recommendation: BUY (maintained)
Target price: $0.60 (maintained)

Deferment of payment for OUC
The group had entered into an agreement to adjust the time period for its outstanding payment of RMB 1.5bn for OUC. Instead of servicing the outstanding amount over three instalments till 2011, the group has obtained approval to defer the payment for OUC progressively. According to the new agreement, the group will have to make a payment of RMB 500m by 30 April 2010 and a payment of RMB 105m by 31 Dec 2010. The bulk of the outstanding amount (RMB 895m or 60% of the outstanding amount for OUC) shall be deferred until the recovery of the economy. In any case, the group shall make payment of RMB 500m by 31 Dec 2012 and the payment of the balance RMB 395m by 31 Dec 2013.

( Why is the Seller willing to accept a deferment ? )

In good shape to service short-term obligations
With a free cash flow of S$ 117m ( RMB 550m) YTD FY09, and no major CAPEX in the next 2 years (estimated normalised capex of S$8-10m), the group is in good shape to service the short term obligations to fulfil a payment of RMB 605m for OUC by 2010. However, we reckon that dividend payments might have to be hold back in order to conserve cash. To be prudent, we now estimate no dividend payments for the next 3-years as the group strengthens its balance sheet with reduced gearing.

Cash crunch concerns evaded
The deferment of the OUC payment will remove the cash crunch concerns on the group. Excluding the outstanding due to OUC, the group’s net gearing will fall from 0.9x to a mere 0.18x. With the cash crunch concerns evaded, the stock could be due for a re-rating when investors re-focus on its solid defensive earnings from education.

Leading education provider at a steal
Being the cheapest listed education stock and trading near to trough levels, REC offers an attractive investment proposition. Moreover, the group will be a stronger education provider in the next upturn given its strengthened balance sheet and growth catalysts from OUC. Reiterate BUY!

[winston]

Not vested anymore. Too complicated for my simple mind .....

From OCBC:-

Raffles Education Corporation: Positive steps forward

OUC debt update. We met up with the Raffles Education Corporation (Raffles) recently to obtain some updates. Raffles confirmed that there will be no interest paid for debt pertaining to its Oriental University City (OUC) purchase and that the subsequent payments of RMB1.5b would be phased into three tranches. The next major payment of RMB500m will be due on 30 Apr 10.

We believe the interest-free deal was struck as a give-and-take agreement due to non performance of "Material Conditions" stated in the Schedule of the original agreement dated 11 Oct 07. In a gist, the main unfulfilled conditions include:-
1) transfer of Langfang Vocational and Health Schools (contributes up to 20,000 students) and;
2) obtaining permits for 1 private college and 2 public-private schools.

( In simple English, what does this mean ? What is the effect of this vs the interest-free deal ? )

Securitising OUC in progress. Management continues to be optimistic that OUC is a well worth investment to embark on its next phase of growth. The listing plan to pay for this asset took its next step with the recent debt deferment deal where 60% of OUC debt is to be repaid in full "upon the recovery of the economy from the current global economic crisis."

Post listing, the provincial government will likely own a significant part of OUC. While we are uncertain of the provincial government's intention with its shares, we think that it would still keep a stake seeing that it can be a cash producing asset that has now been turned around by Raffles. As education is largely driven by regulators, the government's stake in the listed entity will be seen as an advantage for Raffles.

ORIC update. Separately, Oriental Century (ORIC) released a 17-page update by PWC on 26 May 09. PWC basically indicated that it would be impractical to trust any of the accounts. While one of the three operating entities seem to be operationally profitable at this point, PWC warned of possible significant attrition of student numbers due to lack of confidence as a going concern. Raffles has indicated that it could possibly acquire ORIC if it ascertains all its documented and undocumented liabilities.

Paring expectations for the year. We have pared down our estimates for FY09 and FY10 as we mitigate our expectations on the rate of growth its organic expansion can bring. Our fair value is tweaked to S$0.57 (prev. S$0.59) at 12x FY10F PER. We are maintaining our BUY call and will be incentivised to re-peg when student enrolments exceed our expectations.(Kelly Chia)

[winston]

Not vested.

Raffles Education is placing out 160m new shares to raise about $101.2m net at S$0.64 per share. It will use about $60m to repay part of the outstanding purchase consideration for Oriental University City in China and the balance will be used to repay bank loans and for working capital purpose.

[winston]

Not vested.

Raffles Education (S$0.69) - Placement to raise S$101m

Placement of 160m shares at S$0.64. Raffles Education announced the placement of 160m new shares at S$0.64 to raise S$101.2m after fees. The issue price represents a 6.6% discount to the last traded price of S$0.685. Nomura and Credit Suisse are the placement agents. The 160m new shares represent 6.6% of the current shares outstanding.

Use of proceeds. S$41.2m of the proceeds will be used to repay bank borrowings while the remaining S$60m will be used to pay part of the outstanding payment due for OUC. According to the company’s latest update on the OUC payment schedule:
1) Rmb500m is due by 30 April 2010;
2) Rmb105m is due by 31 Dec 2010;
3) Balance of Rmb895m is due upon the recovery of the economy, with Rmb500m due by 31 December 2012 and Rmb395m by 31 December 2013.

Valuation and recommendation
FY09-11 EPS estimates diluted by 2-6% as dilution from new shares is partially offset by interest savings. The fund-raising does not come as a surprise to us as we had pointed out earlier that the management’s target of achieving debt-free status by end- FY10 was aggressive.

Maintain Neutral; target price raised to S$0.71 (from S$0.44). We view the placement positively as it eases investors concerns over the company’s cashflow and gearing.

Taking into account the improved financial position of the company post-placement, we remove our 30% discount to peer valuation. With signs of a budding recovery in global economies and the improved risk appetite of the equity markets, our target price is lifted to S$0.71, based on 16x CY10, in line with the low end of peers due to its weak nearterm numbers (3Q09 results), from S$0.44 (based on 30% discount to peer valuation). Maintain Neutral.

[winston]

Singapore Hot Stocks-Raffles Education plunges on share sale

SINGAPORE, June 11 (Reuters) - The benchmark Straits Times Index <.FTSTI> rose 0.04 percent as of 0504 GMT on Thursday.

The following stock was on the move:

** RAFFLES EDUCATION CORP FALLS ON SHARE SALE Shares of Raffles Education Corp fell as much as 9.5 percent on Thursday after the firm said it will place 160 million new ordinary shares at 64 Singapore cents each, confirming a Reuters story on Wednesday.[ID:HKG211023]

The company, which runs colleges around Asia, expects to raise net proceeds of S$101.2 million ($70 million), which will be used to pay down bank loans and to make part payment for Oriental University City Development Co in China which it agreed to buy in late 2007 for 2 billion yuan ($293 million) on deferred payments.

"It seems that they keep raising money from the market. If they do it so many times it's actually not a good sign," a local trader said.

In March, the firm raised S$30.5 million by issuing 80 million new ordinary shares. At the midday break, shares of Raffles were down 8 percent at S$0.63.

(Reporting by Eveline Danubrata; Editing by Saeed Azhar) (([email protected]; +65 6403 5669; Reuters Messaging

[Aspellian]

During the pre-March 09 bottom, most companies are doing rights issue as share prices are severely depressed. Now that share prices are up, we will expect more companies to do share placements. M&As will also increase and capital investments will begin with the increased funds... green shoots?

[millionairemind]

During the pre-March 09 bottom, most companies are doing rights issue as share prices are severely depressed. Now that share prices are up, we will expect more companies to do share placements. M&As will also increase and capital investments will begin with the increased funds... green shoots?

Just making hay while the sun shines.... before the window closes again.. haha...

[Aspellian]

During the pre-March 09 bottom, most companies are doing rights issue as share prices are severely depressed. Now that share prices are up, we will expect more companies to do share placements. M&As will also increase and capital investments will begin with the increased funds... green shoots?

Just making hay while the sun shines.... before the window closes again.. haha...

agree with you... often these business owners like to take shareholders for a ride...

[millionairemind]

Raffles Education Corporation
June 11 close: $0.62
CIMB-GK RESEARCH, June 11

PLACEMENT to raise $101 million. Placement of 160 million shares at $0.64. Raffles Education announced the placement of 160 million new shares at $0.64 to raise $101.2 million after fees. The issue price represents a 6.6 per cent discount to the last traded price of $0.685. Nomura and Credit Suisse are the placement agents. The 160 million new shares represent 6.6 per cent of the current shares outstanding.

Use of proceeds. $41.2 million of the proceeds will be used to repay bank borrowings while the remaining $60 million will be used to pay part of the outstanding payment due for OUC.

According to the company's latest update on the OUC payment schedule: 1) 500 million yuan (S$106.2 million) is due by April 30, 2010; 2) 105 million yuan is due by Dec 31, 2010; 3) Balance of 895 million yuan is due upon the recovery of the economy, with 500 million yuan due by Dec 31, 2012 and 395 million yuan by Dec 31, 2013.

Valuation and recommendation. FY 2009-2011 EPS estimates diluted by 2-6 per cent as dilution from new shares is partially offset by interest savings. The fund-raising does not come as a surprise to us as we had pointed out earlier that the management's target of achieving debt-free status by end-FY 2010 was aggressive.

Maintain 'neutral'; TP raised to $0.71 (from $0.44). We view the placement positively as it eases investors concerns over the company's cashflow and gearing.

Taking into account the improved financial position of the company post-placement, we remove our 30 per cent discount to peer valuation.

With signs of a budding recovery in global economies and investors' improved risk appetite, our target price is lifted to $0.71, based on 16x CY 2010, in line with the low end of peers due to its weak near-term numbers (Q3 2009 results), from $0.44 (based on 30 per cent discount to peer valuation).
NEUTRAL