Raffles Education

Raffles Education: FY14 net profit rose 80% to $54.5m, despite revenue being relatively flat and steady at $127.4m (-1%), as bottom-line was aided by a 53% jump in other operating income to $102.5m. The increase in other operating income was due to: 1) Gain of $45.5m (before taxes) on divestment of investment properties of 490 mu land and properties in Oriental University City 2) gain of $40.8m on disposal of 50% equity interest in Value Vantage Investment and Management; 3) compensation income of $4.1m confirmed by Langfang City Government, in Oct ‘13. Bottom-line was also aided by a 51% decline in other operating expenses to $63.4m, due to the absence of net reversal of government grant receives of $57.1m from the previous year, and a decrease in rental expenses. This was however partially offset by an 82% decline in fair value gains on investment properties to $7.3m. Going forward, Raffles Edu guides that its PRC college revenue is stabilizing and the group continues to see positive outcomes from implementing new transformational strategies in PRC. The group is also continuing to see positive outcomes from its expansion strategy in the Ex-PRC region, and will look at opportunities into other education related investments to achieve sustainable growth. Raffles Edu currently has a net gearing of 0.37x. At the current price, the group trades at 0.67x P/B.