2Q09 net profit $27m (+60%y-o-y). Headline net profit was S$27m (+60% y-o-y) on revenue of $54m (+38% y-o-y) were in line with our expectations. The higher revenue was from higher school fees, student enrollment and contribution from new acquisitions (Wanbo, Shaanxi and OUC). Included in the income was a $6.3m gain from sale of land. Student numbers was at 33,873 up by c.58% y-o-y due to acquisitions but dipped slightly q-o-q by 1% due to graduation of students under third-party degree that has been ceased.
OUC installment deferred. Management shared that they have obtained agreement from the seller to defer the installments (c.S$100m) by a year. As such, there is no urgency for the payment of the installment in Feb as originally understood. Management expects to pay down part of its bank loans from its operating cashflow generated.
Organic growth focus. They are looking at adding 3 private colleges in China (Yunnan, Langfang and Tianjin), 2 in India and 1 in Jarkarta. While it will be relatively slow versus acquisitions, initial investment is minimal and contribution should progressively grow to be like those in its current network.
Maintain Buy. We continue to see the Group’s business positively in the current climate given that education business is counter-cyclical. Maintain Buy, TP unchanged at $0.80 (based on 18x FY09F EPS). A 1cent dividend in scrip was declared.
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