Raffles Education

[millionairemind]

Published August 25, 2009

Raffles Education full-year net profit dives 48% to $51m

By TEH SHI NING

RAFFLES Education Corp's net profit for the full year ended June 30 dropped by almost half due mainly to an impairment charge.

Net earnings dived 48.3 per cent to $51.1 million from $98.8 million in FY2008.

The year saw a $33.1 million impairment of its entire investment in associate Oriental Century Limited (OCL).

'The group has stopped equity accounting for the results of OCL in FY2009,' said Raffles Education.

But without this impairment, Raffles' net profit would still have fallen 14.8 per cent to $84.2 million.

Other factors causing the earnings fall include a $15.5 million increase in rental and personnel expenses due to investments in six new colleges in India, Indonesia and China, and a larger headcount after operations expanded.

Its tax expenses also rose $15.3 million, while finance costs rose $7.2 million and net bad debt expenses rose $3.3 million due to prudence.

Turnover had in fact risen 6.3 per cent to $202 million, from $190 million the previous year, due to an overall increase in student enrolment in the group's schools.

Raffles Education chairman and chief executive Chew Hua Seng said: 'Notwithstanding the one-off impairment allowance, the group has performed well and we continue to invest in growth.'

As part of its organic expansion plans, Raffles intends to open eight more colleges - three in Asia-Pacific and five in India - and to look for strategic acquisitions to develop the group's brand equity regionally.

Other growth drivers, the group says, include the development of its own proprietary courseware and Oriental University City, a self-contained campus in China's Hebei province providing education services to 14 colleges.

Following two placements during the year, the group's gearing ratio fell to 0.02 times this year, from 0.25 times last year.

Cash and cash equivalents as at June 30 totalled $115.3 million.

While earnings per share fell 49.9 per cent to 2.17 cents, the group's net asset value per share grew 25 per cent to 20.07 cents as at June 30.

The group has proposed a final tax-exempt dividend of one cent per share.

Raffles' shares closed half a cent lower at 59.5 cents each yesterday.

[winston]

Education is supposed to be simple business...

[Aspellian]

Published August 25, 2009

Raffles Education full-year net profit dives 48% to $51m

By TEH SHI NING

RAFFLES Education Corp's net profit for the full year ended June 30 dropped by almost half due mainly to an impairment charge.

But without this impairment, Raffles' net profit would still have fallen 14.8 per cent to $84.2 million.

Its tax expenses also rose $15.3 million, while finance costs rose $7.2 million and net bad debt expenses rose $3.3 million due to prudence.

As part of its organic expansion plans, Raffles intends to open eight more colleges - three in Asia-Pacific and five in India - and to look for strategic acquisitions to develop the group's brand equity regionally.

Following two placements during the year, the group's gearing ratio fell to 0.02 times this year, from 0.25 times last year.

Raffles' shares closed half a cent lower at 59.5 cents each yesterday.

1) Impairment charge - shows that there are great risks to handle when it comes to M&A path - which is what Raffles Edu trying to pursue. It is still a relatively small edu player - look at those China Edu companines listed in US indexes and you can see the big gap. So Raffles Edu ("RE") have to acquire smaller players (eg. OCL) or those players in trouble (eg. Hartford etc) prob with much less corporate governance --> translates to greater risk.

2) Adjusted net profit pre-impairment -also going down. RE growth is stalling. It will be a challenge for the share price to continue on its Multi-Bagger journey... or has the journey ended and Multi-Begger has begun?

3) $3.3mm bad debt expense due to prudence? what a nice way to put it? seldom do companies willingly write off debts unless the auditors push-and-push and probably these debts are a few years old already? in the first place, why are there such large bad debts? Attend school first, pay later? or the students in china and india just disappear after graduating? Do you know that in big countries - prepaid cards are the norm, becos its near-impossible to "bill" customers and hope that they will pay back. mobility is too fluid. Spore with its monthly bill system (for almost everything - HP bills, SCV, utilities etc etc) is the exception rather than the norm.

4) Share placements - great dilution. throwing good $ after bad $...

So is RE now any of the following at current price going forward:
- Multi-bagger?
- dividend stock?
- growth stock?
- mature stock?
- turnaround play?
- or multi-begger?

thread with care... if you hope RE will be a multi-bagger think twice and fear more.
if you hope that RE will do an OSIM, possible but RE has not dropped to the bottom of the valley. Many institutions are holding on... if one day all the funds want to get out of RE, cos the CEO can no longer convince them of RE's growth story.... good luck to those still holding.


PS: i have not read RE's financials in detail nor understand all synergies the M&A it has go throw or analyse its strategic directions... basically saying i anyhow hamtam and rojak above comments. hohoohohoho!!!!!

[winston]

Not vested. From Kim Eng:-

Raffles Education – 4Q09 results (Pauline Lee 64321453) Previous day closing price: $0.595
Recommendation: Buy (maintained)
Target price: $0.69 (reduced from $0.77)

Have seen the worst
RLS recorded a 48% yoy decline in net profit to $51.1m that was below our expectations. Stripping out exceptional items, FY09 core earnings (-4.5% yoy) disappointed mainly due to weaker-than-expected student enrolment and higher taxes. Higher taxes were incurred due to the disposal of land within OUC and higher withholding taxes overseas.

Organic growth mired by global economic slowdown
Student enrolment stood largely flat at 32,828. Higher student enrolment from PES in Asia Pacific was offset by declining PES enrolment in China. The student enrolment in China was affected by the economic slowdown and the change of name of the PES schools as required by the new regulations in PRC. However, the group believes that the worst is over and is targeting an organic student enrolment growth of 10-15% in FY10.

Moving into the next phase of growth
To capture rising demand for Vocational & Technical education, RLS intends to set up 8 new colleges in FY10 in fast-growing countries like India and Vietnam. Positive catalysts could come from OUC, through M&A and JV opportunities with the existing colleges on campus that currently contains a sizable student population of 35,000 students.

Dropping off excess baggage
Net gearing was effectively halved to 68%, thanks to the on-going efforts in debt repayment and positive operating cashflows. With a cash-generative business and the payment of OUC deferred, the group aims to pare down its gearing by FY10. If executed well, besides having the largest education network in Asia Pacific, RLS will be financially sound to ride the next wave of growth and to resume dividends.

Starting on a clean slate
While we have reduced our FY10 earnings estimates by 15% to take into account higher tax rates and higher personnel expenses, we remain positive on RLS long-term growth prospects. Its extensive and growing education network presents great value as it matures beyond a critical mass. Maintain BUY with a revised target price of 69 cents pegged to 18.5x FY10 PER, in line with global peers.

[Aspellian]

Not vested. From Kim Eng:-

Raffles Education – 4Q09 results (Pauline Lee 64321453) Previous day closing price: $0.595
Recommendation: Buy (maintained)
Target price: $0.69 (reduced from $0.77)

Have seen the worst
RLS recorded a 48% yoy decline in net profit to $51.1m that was below our expectations. Stripping out exceptional items, FY09 core earnings (-4.5% yoy) disappointed mainly due to weaker-than-expected student enrolment and higher taxes. Higher taxes were incurred due to the disposal of land within OUC and higher withholding taxes overseas.

Organic growth mired by global economic slowdown
Student enrolment stood largely flat at 32,828. Higher student enrolment from PES in Asia Pacific was offset by declining PES enrolment in China. The student enrolment in China was affected by the economic slowdown and the change of name of the PES schools as required by the new regulations in PRC. However, the group believes that the worst is over and is targeting an organic student enrolment growth of 10-15% in FY10.

Moving into the next phase of growth
To capture rising demand for Vocational & Technical education,

Dropping off excess baggage
With a cash-generative business and the payment of OUC deferred, the group aims to pare down its gearing by FY10. If executed well, besides having the largest education network in Asia Pacific, RLS will be financially sound to ride the next wave of growth and to resume dividends.

Starting on a clean slate
While we have reduced our FY10 earnings estimates by 15% to take into account higher tax rates and higher personnel expenses, we remain positive on RLS long-term growth prospects. Its extensive and growing education network presents great value as it matures beyond a critical mass. Maintain BUY with a revised target price of 69 cents pegged to 18.5x FY10 PER, in line with global peers.

Vocational and Technical courses - less niche? lower margin?cheaper course?
China and india markets - bad debts always a risk?
Cashflow generating - if so why do so much share placements?
Maintain BUY with a revised target price of 69 cents pegged to 18.5x FY10 PER, in line with global peers - a problem with analysts - always like to compare with the very best - hahah!! things are cheap for a reason.

I do wish for Raffles Edu to do well <cos reminds me of Sir Stamford Raffles - spore icon>, but still wondering whether the analysts are delaying the inevitable <sell call>. let's see how it develops....

<not vested>

[kennynah]

I do wish for Raffles Edu to do well <cos reminds me of Sir Stamford Raffles - spore icon>

i am lost for words....

[Poles]

I do wish for Raffles Edu to do well <cos reminds me of Sir Stamford Raffles - spore icon>

i am lost for words....

i thought s'pore icon is chinese old man??

[Aspellian]

I do wish for Raffles Edu to do well <cos reminds me of Sir Stamford Raffles - spore icon>

i am lost for words....

thanks for the praise!! < >

i already told you i novice investor liao! i usually throw darts or see which names are nice and rhymes with my names!

easier to invest that way - keep it simple mah!

[kennynah]

no...no....singapore's representative icon is

[winston]

Fidelity reduced their stake from 6.61% to 5.62% ..