Raffles Education

Raffles Education: (S$0.365) Spinning off of Oriental City University on HK GEMS board Raffles Education has released listing details on the spin-off of Oriental University City (OUC), on Hong Kong's Growth Enterprise Market. OUC is offering 45m new shares (25% enlarged share capital) at a price range of HK$2.60-2.68 per share via placement. At the mid-price of HK$2.64, OUC is valued at HK$475m (S$85m) or ~10x FY14 P/E. Book-building will be from 7-12 Jan and the placing price announced on 15 Jan. The counter is expected to debut on 16 Jan. BNP Paribas will be the sole sponsor, bookrunner and lead manager of the placement. OUC is a university city manager and operator based in China's Langfang city in Hebei province. It owns and occupies a gross campus site of 487,270 sqm, and leases out education facilities (119,453 sqm gfa) and dormitories (144,490 sqm gfa) to mostly vocational institutes in China. For the 2014-2015 academic year, the company is leasing out its premises and facilities to seven contract colleges with a combined student population of 19,000 and has entered into service agreements with three new contract colleges. The campus is strategically located close to Beijing Daxing Industrial Development Zone, Tianjin Binhai New Area and Tianjin Jingbin Industrial Zone, where there is a high concentration of foreign and domestic companies engaging in aviation, service industries and information technology. The ongoing economic restructuring in China is expected to generate more demand for skilled labour, thereby benefitting vocational training hubs like OUC. Assuming a placing price of HK$2.64, the offer is expected to raise net proceeds of HK$77.8m, which will be earmarked for construction of new dormitories on its campus site. At $0.365, Raffles Education is valued at 0.65x P/B. There is no coverage on the stock.