Overseas Education

Overseas Education: CIMB initiated coverage on Overseas Education (OEL) with an OUTPERFORM, TP of $0.91. OEL listed to raise proceeds for the financing of land and construction of a new campus in Pasir Ris, which will jack up its student capacity by 22% in 2015. It could take on $72.3m or less of debt to finance this expansion. Other than capacity constraints at its current premises, the new campus will sport newer and better facilities. Capacity expansion is also its biggest re-rating hurdle. Due to resident “activism” in the Pasir Ris area to preserve the woodlands that the new campus will be occupying, there are concerns that OEL's plans could be delayed or jeopardised. Any delay in the new campus would change the timeline for the next step-up in OEL's earnings. Once the campus is completed, capex needs will taper off and there could be room for higher dividend payouts, CIMB believes. Excess cash may also be used to pursue growth opportunities in China where land is more available and the provincial authorities, more welcoming.