Raffles is one of the cheapest education stocks among its listed peers, trading at more than 50% discount to its US-listed peers. Such steep discounts are unwarranted and points to deep undervaluation of the stock considering its superior earnings track record over the decade, outstanding margins and remarkable growth momentum. Its commitment to generous dividend payout (>85%) adds to its appeal.
Despite the dearth of acquisitions, the management expects enrolment to grow 20-30% per annum by focusing on its enlarged education network. We estimated rising student enrolment to sustain organic earnings CAGR of 24% for the next 3 years. This works out to a recurring annual earnings stream of at least S$100m. Moreover, its ability to go for proprietary degrees is a competitive edge to drive superior margins.
We see great potential in the recent acquisition of OUC given its strategic location at Langfang Development Zone and potential to boost student enrolment by over 70%. We estimate net profit contributions from OUC to amount to at least $30m, which could potentially boost the FY10 earnings by more than 20%. The OUC contributions that we have yet to factor in our earnings projections could offer positive catalysts.
The recent share price correction to trough levels of 7x forward PER presents an unprecedented opportunity to invest in the stock. Raffles education offers a good mix between growth and attractive dividends. We are initiating coverage on the stock with a BUY with a target price of $0.60 using 0.7x PEG (based on a forward 3-year earnings CAGR of 17%).
Sponsored Links
1 comment:
Raffles Education seemed to have involved more subsidiaries in such property investments. the lack of transparency relating to Raffles Education Remuneration of its board of directors and family members...
Raffles Education Corporation Annual General Meeting will be held on 30 Oct 2020 at 11am and all Raffles Education Shareholders need to hold their Board accountable.
Post a Comment