Monday, February 26, 2007

Raffles education

Raffles Edn sees 40% profit rise a yr for 5 yrs

RAFFLES Education Corp Ltd, a regional operator of design and business schools, expects to grow its net profit by at least 40 per cent every year in the next five years as its student base expands, particularly in China.

'A 40 per cent annual growth in our bottom line in the next five years is achievable,' Raffles Education CEO Chew Hua Seng told XFN-Asia in an interview on Thursday.

In the last three financial years, Raffles Education's net profit increased by an average of 81 per cent annually, registering net profit of $32.7 million in the year to June 2006. The growth momentum has been sustained in the current financial year, with the company's net profit up 73.9 per cent year on year to $24.7 million in the first half to December.

China has been a key growth driver and will remain so, Mr Chew said. Raffles Education currently has 4,300 students in China, accounting for nearly half of the group's 9,000 students.

Mr Chew said the group's student headcount in China is set to more than double once the acquisition of a majority interest in Easycall International is completed next month.

'The group is likely to have more than 15,000 students by the end of the current financial year to June, three years ahead of schedule.'
- Raffles Education CEO Chew Hua Seng

Earlier this month, Raffles Education bought an initial 24 per cent stake or 62 million shares of Easycall for $25.7 million. It has an option to buy another 35 million shares from Easycall shareholder Wong Fong Fui for $14 million.

Mr Chew said the share purchase along with earlier purchases of Easycall shares from the open market will give Raffles Education a majority interest in Easycall.

Raffles Education, however, will not be required to make a mandatory takeover bid for Easycall as the transaction has been exempted from Singapore rules requiring investors who had accumulated more than 30 per cent stake in listed companies to make a mandatory takeover bid.

Mr Chew said he was attracted to Easycall because the company owns Boustead College, a school in China's Tianjin University that offers courses in business administration, computer science and information technology as well as literature and the arts. Boustead College has 6,000 students and the acquisition of a controlling interest in Easycall will further strengthen Raffles Education's presence in China, he said.

Easycall is Raffles Education's second acquisition in China. It bought a 20.16 per cent stake in Oriental Century Ltd for $17.08 million in December. 'These acquisitions are earnings accretive,' Mr Chew said.

With the rapid increase in the company's student base in existing schools and the additional students coming from Easycall's Boustead College, Mr Chew said the group is likely to have more than 15,000 students by the end of the current financial year to June, three years ahead of schedule.

In 2005, Raffles Education had targeted to have 15,000 students from its schools in Singapore, China, India, Australia and Thailand by 2010. The group had less than 6,000 students when the target was set.

Mr Chew said the Indian operations, which Raffles Education started some two years ago, are expected to break even in the current fiscal year. 'I am confident we will do well in India.'

Mr Chew also expects earnings at 60 per cent-owned subsidiary Hartford Education to contribute positively going forward. 'Next year, you'll see even faster growth from Hartford.'

Raffles Education bought into Hartford in April 2004 when Hartford was still loss-making. Raffles Education has since turned around Hartford, which made a net profit of $1.17 million in the year to June 2006.

Mr Chew said Raffles Education has managed to make Hartford profitable by increasing the number of students enrolled to its proprietary diploma courses, giving Hartford better margins. - XFN-Asi

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