Raffles Education

Raffles Education: 3QFYJun11 results below expectations.
Revenue -15% yoy to $37.8m, due to
i) lower enrolments resulting from a reduction in the allocation of National Education System (“NES”) students as a result of a decline in the no. of students in China taking the Gao Kao (college entrance exam), and
ii) appreciating SGD which adversely affected RMB-denominated revenue…

Coupled with an increase in income tax expense and higher personnel expenses with the Group’s enlarged operations, net profit -74% yoy to $2.4m.
Stock trades at 1x P/B, 16.5x P/E…

Credit Suisse maintains Underperform, cuts TP to $0.45 from $0.72. Says earnings outlook remains challenging even as the co heads into its seasonally strongest 4Q. Cuts enrolment estimates, raises operating cost assumptions (another 4 new schools planned) and reduces earnings estimates by 43-46%. Notes valuation remains demanding versus the US-based peer average (16x) and Asian peers (12x).