I was watching a BBC documentary on China's education system. In the program, one of the scenes that i vividly remember is the principal of Xiu Ning high school addressing the final year students. He mentioned that for AnHui Province (population of 60mil), there will be 560,000 students taking the university entrance exams, but only 240,000 of the students will gain entry to the university. He said: "Competition is fierce... as the students shoulder their parents expectation... the high demands of the school and the hope of the Motherland!"
Asian economies are on track to recovery with many countries recording expansions in their quarterly GDPs. As the countries grow, advance and modernise, the demand for qualified and better educated manpower will follow suit. Personally, with the fierce competition everywhere, students understand the value of education. In order to progress and increase their personal incomes, education will facilitate in their quest for a better life. This is where Raffles Education Corp (REC) comes in to capitalise on this concept.
From their website (http://www.raffles-education-corporation.com/):
Raffles Education Corporation Limited (“RafflesEducationCorp”) is the largest private education group in Asia-Pacific. Since establishing its first college in Singapore in 1990, the Group has grown to operate 3 universities and 26 colleges across 10 countries in the Asia-Pacific region: Singapore, China, India, Indonesia, Vietnam, Malaysia, Thailand, Mongolia, Australia and New Zealand.
More than 31,000 students enrolled in RafflesEducationCorp’s tertiary programmes benefit from a quality education that provides graduates with a well-rounded hands-on experience that is relevant to the industry.
The Group also owns the Oriental University City (“OUC”) in Langfang, Hebei Province, China – a 3.31 million square metre self-contained campus. Within this campus, OUC provides education services to 15 colleges with a total student population of approximately 35,000.
Headquartered in Singapore, RafflesEducationCorp employs over 2,850 academic and administrative staff, and is listed on the Mainboard of the Singapore Exchange.
What I Like about REC:
1) RDC's exposure to asian countries. According to their annual report, as % of rev, northasia contributes 74.1%, ASEAN 19.1%, Australasia 5.7%, and South Asia ~1% of their revenue.
2) A well run private institution like REC, while not the top tier schools in the country, provide an good alternative for students to pursue their tertiary education. This is especially so in developing asian cities where limited state resources result in limited accessibility.
3) A depressed share price with attractive dividend yield. Looking at the historical price range, the current price of 46cents is attractively valued both intrinsically and relatively to the market.
Company's Strategy: Grow its business by
1) setting up more colleges in the region;
2) development of its proprietary courseware;
3) value creation of Oriental University City (OUC); and
4) strategic acquisitions
Student Numbers
one thing to note is that the growth of the company has slowed recently. Quote from OCBC research: "They managed to grow its PES (Private Education) segment by 5.3% (+510 students), its PNES (Hybrid) segment by 20.4% (+328 students), the increases were not enough to offset the 10% slide (-2157 students) in its NES (National Education) segment. As a result, its total PES + PNES +NES enrolment fell 4.0% (-1319 students)."
Refer to table: http://4.bp.blogspot.com/_0APGKMRBfYA/SwLK8HrfTFI/AAAAAAAAABQ/sjQH0Ut42G8/s1600/student.jpg
Refer to my blog for the financial analysis i did. Basically, based on DCF, i worked out an Intrinsic Value of S$0.61per share for the company. At the time of my analysis, the share price traded at S$0.45.
