Overseas Education

Overseas Education (OEL): DBSV initiates at Buy with TP $1.03. OEL is ranked 3rd by turnover among the international schools in Spore, with a 10% mkt share. The private school offers both K-12 International Baccalaureate (IB) curriculum and the Cambridge-based secondary education (IGCSE) programmes to children aged between 3 and 18 years of expatriate parents in Singapore. Meanwhile Singapore is the No.1 expat destination in the world, with the highest concentration of wealthy expats, which should underpin demand for OEL’s education services. With 3,680 students, OEL currently operates close to its capacity of 3,940 students. DBSV expects only 6%/10% fee hike to lift near term earnings. However the house sees growth accelerating when the new campus in Pasir Ris is completed in 2016. Then, OEL can add 900 more students and raise fees, given newer and better facilities. On a cash basis however, OEL presents a highly cash generative business with operating cashflow growing at 48% CAGR over 2010-13. Valuations are compelling at only 15x PE and a FCF yield of 13%, vs regional education service providers trade at an average of 21x current PE and 6% FCF yield. OEL has a dividend payout policy of at least 50% of earnings, which translates to a decent yield of ~4%.