Raffles Education

[winston]

Not vested. From DBS:-

Raffles Education is likely to convert part of the upcoming S$100m installment into interest bearing loans. This should re-instill confidence on the counter and boost share price. Student enrollment remains firm. Reiterate Buy, TP: S$0.80.

[winston]

No news on SGX website. The drop yesterday was quite big

[millionairemind]

February 5, 2009, 7.04 pm (Singapore time)

Raffles Education Q209 net profit up 66%

By CHEW XIANG


RAFFLES Education Corp said on Thursday net profit for its second quarter to Dec 31 rose 66 per cent to S$27 million (US$18 million), from S$16.3 million a year ago.

Profits were boosted by a S$6.3 million gain from disposal of investment properties and a S$1.45 million net exchange gain.

Diluted earnings per share jumped 61.1 per cent to 1.16 Singapore cents, from 0.72 Singapore cents a year ago.

Sales were up 38 per cent to S$54.2 million, from S$39.3 million. It held cash and cash equivalents of S$75.8 million.

The company said it expected to see growth of its business through the setting up of more colleges, development of proprietary courseware, and strategic acquisitions.

It has declared a dividend in shares at the rate of one Singapore cent per ordinary share held.

Raffles Education closed at 48.5 Singapore cents today, down 3 per cent.

[winston]

Small postion to follow their story..

If one minus away the extraordinary gains, Profit is up only 18% on 38% increase in Sales on undiluted basis.

It will be worse after considering any dilution..

[winston]

Singapore Hot Stocks-Raffles Education rise on profit gains

SINGAPORE, Feb 6 (Reuters) - Shares of Raffles Education Corp gained as much as 7.2 percent on Friday after it posted a 66 percent rise in second quarter profit.

Credit Suisse in a client note on Friday maintained its "outperform" rating on Raffles Education, highlighting its growing presence in China.

The firm has also got an agreement to delay payment for its Oriental University City in China, improving its cash position.

By 0140 GMT, Raffles Education was up by 6.2 percent at S$0.52.

[winston]

Small Position. From DBS

Back to basics
2Q09 net profit was within expectations. Revenue grew 38% y-o-y on higher fees, students and acquisitions. The expected c.S$100m installment for OUC (Oriental University City) has been deferred and should ease concerns on short-term funding. Management continues to look to set up new schools to generate organic growth. Maintain Buy.

2Q09 net profit $27m (+60%y-o-y). Headline net profit was S$27m (+60% y-o-y) on revenue of $54m
(+38% y-o-y) were in line with our expectations. The higher revenue was from higher school fees, student
enrollment and contribution from new acquisitions (Wanbo, Shaanxi and OUC). Included in the income was
a $6.3m gain from sale of land. Student numbers was at 33,873 up by c.58% y-o-y due to acquisitions but
dipped slightly q-o-q by 1% due to graduation of students under third-party degree that has been ceased.

OUC installment deferred. Management shared that they have obtained agreement from the seller to defer the installments (c.S$100m) by a year. As such, there is no urgency for the payment of the installment in Feb as originally understood. Management expects to pay down part of its bank loans from its operating cashflow generated.

( Why would the Seller agree to a deferment ? )

Organic growth focus. They are looking at adding 3 private colleges in China (Yunnan, Langfang and
Tianjin), 2 in India and 1 in Jarkarta. While it will be relatively slow versus acquisitions, initial investment is
minimal and contribution should progressively grow to be like those in its current network.

Maintain Buy. We continue to see the Group’s business positively in the current climate given that
education business is counter-cyclical. Maintain Buy, TP unchanged at $0.80 (based on 18x FY09F EPS). A 1cent dividend in scrip was declared.

[winston]

From CIMB:-

Raffles Education ($0.49) -2Q09 results - Business as usual
In line. 2Q09 core net profit of S$20.7m (+27% yoy) was in line with our expectations, representing 19% of our FY09 estimates and 18% of consensus. 1H09 core net profit formed 43% of our original FY09 estimates and 41% of consensus. Core net profit margin slipped to 38% from 41%, on the back of higher operating expenses. The top line jumped 38% yoy to S$54.2m due to higher student enrolment, increase in fees, and new contributions from OUC, Wanbo College and Shaanxi Electronic Information Institute. An interim dividend of 1 Scent/share was declared.

More gain from sales of property in OUC. Reported net profit of S$27m included a S$6.3m gain from the sale of investment property from OUC (S$6m in 1Q09). Management has guided that they have another two plots of land which will be sold in FY09, which is expected to reap approximately another S$12m in profits.
Payment for OUC deferred for at least a year. Management’s earlier expressed confidence in their ability to defer the pending payments for the purchase of OUC has been well-founded, with the management disclosing that all the remaining payments relating to the purchase of OUC, totalling approximately S$300m over 3 years, have been deferred by at least a year, with no interest charged, significantly lifting pressure on
the company’s cashflow.

Maintain FY09-11 core EPS estimates. Our core EPS estimates remain intact. However, we are increasing our FY09 exceptional item forecast to S$24m from S$6m, to account for the land sales. Hence, our FY09 reported profit forecast rises by 16% to S$132m.

Maintain Outperform with unchanged target price of S$0.72. The management has also guided that they are planning to use the cash conserved through the scrip dividend scheme to lower their borrowings. Target price remains at S$0.72, still based on 12x CY10 P/E, a discount to peers due to its slower forecast growth. Maintain Outperform.

[winston]

Small Position. From LIm & Tan:-

OUC Funding Gap Addressed S$0.485-RAED.SI

Excluding the $6.3mln gain on disposal of investment properties, 2Q to Dec ‘08 net profit rose 25% yoy
to $20mln in line with management as well as consensus forecast.

The bottom-line growth rate has slowed from the historical 60+% range due to higher finance charges, bad debt expenses, higher rental & depreciation expenses.

But the positive surprise from yesterday’s briefing was that management was able to address the market’s concern regarding the funding gap for their S$300mln payment (due equally over the next 3 years) for the acquisition of Oriental University City (OUC).

Management have managed to not only push back payments due by 1 year, they have also obtained
permission for interest charges to be waived instead of the 5-6% charge that were talked about.

This translates to interest saving of $5.5mln a year (5-6% of profits) and will help to lessen balance sheet
concerns that have been the market’s key concern.

( How can they do it ? Why would the Seller agree ? )

However, the downside is that the profit warranty given previously will no longer apply, but management said that the educational sector in China historically has remained stable as students who have made it to the universities rarely drop out due to the difficulties in getting in let alone dropping out after 2nd or 3rd year. And students usually pay upfront fees for the first year.

( So why would Seller exchange Profit Warranty for Sin$5.5m ? )

The company will be paying their annual dividends (4 cents a share) in scrip instead of cash which is expected to help them save $93mln a year. The downside is that if all shareholders elect for scrip dividends, earnings per share dilution would be about 8.8%.

Current financial position is reasonable with cash of $75.8mln and shareholders funds of $382mln versus short term debts of $164.268mln and long term debts of $41.653mln. Interest cover is a healthy 14x.

Looking ahead, management expects to see continued growth via setting up more colleges in the region, development of proprietary courseware, value creation of OUC and strategic acquisitions.

With full year ending June 2009 net profit expected to grow 30% to $102mln, its forward PE of 11x is
undemanding relative to its growth as well as regional peer’s 15-20x PE.

The education sector, especially vocational training in China is expected to benefit from the government’s aim to reduce unemployment and reduce mis-match between graduates and workforce requirements.

[millionairemind]

Raffles Education
Outperform
CIMB-GK Securities
Feb 6 close: $0.52

BUSINESS as usual: Q2 2009 core net profit of $20.7 million (up 27 per cent y-o-y) was in line with our expectations, representing 19 per cent of our FY2009 estimates and 18 per cent of consensus.

H1 2009 core net profit formed 43 per cent of our original FY2009 estimates and 41 per cent of consensus. Core net profit margin slipped to 38 per cent from 41 per cent, on the back of higher operating expenses. The top line jumped 38 per cent y-o-y to $54.2 million due to higher student enrolment, increase in fees, and new contributions from OUC, Wanbo College and Shaanxi Electronic Information Institute. An interim dividend of one cent per share was declared.

More gain from sales of property in OUC: Reported net profit of $27 million included a $6.3 million gain from the sale of investment property from OUC ($6 million in Q1 2009).

Management has guided that they have another two plots of land which will be sold in FY2009, which is expected to reap approximately another $12 million in profits.

Payment for OUC deferred for at least a year: Management's earlier expressed confidence in their ability to defer the pending payments for the purchase of OUC has been well-founded, with the management disclosing that all the remaining payments relating to the purchase of OUC, totalling approximately $300 million over three years, have been deferred by at least a year, with no interest charged, significantly lifting pressure on the company's cashflow.

Maintain FY2009-2011 core EPS estimates: Our core EPS estimates remain intact. However, we are increasing our FY2009 exceptional item forecast to $24 million from $6 million, to account for the land sales. Hence, our FY2009 reported profit forecast rises by 16 per cent to $132 million.

Maintain Outperform with unchanged target price of $0.72: The management has also guided that they are planning to use the cash conserved through the scrip dividend scheme to lower their borrowings. Target price remains at $0.72, still based on 12 times calendar year 2010 price-to-earnings, a discount to peers due to its slower forecast growth.

[winston]

Did you all remember what happened at Informatics a few years ago ?

When I have some time, I would need to investigate the following for Raffles:-
1. How did the Co recognise their revenue? Is it at the point of registration or when payment is received?
2. What is the Co's loan borrowings exposure?

In the meantime, if you happened to have the answer to the above questions, please do help me with them.

Thanks and take care,
Winston