Overseas Education Limited

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#51
(10-01-2017, 07:35 PM)karlmarx Wrote: Picked up yesterday's copy of Business Times and noticed the huge front cover ad for OFS.

Looks like they are trying hard to get more students. The central theme of their ad positions OFS as a more holistic alternative to MOE schools -- which has seen increasing foreign student enrollment over the past decade.

Looking forward to its next quarterly.

It was a nice advert indeed but, at the end of the day, I don't think there is that much differentiation between the top international schools. However, areas where OFS seems to be trying to differentiate itself seems to be :

(1) It offers a lot of mothertongue  language tuition for non-English native speakers including languages such as Swedish, Hebrew, German etc. That seems to be a bit of a niche and could help attract students who want to focus on their mothertongue as well as English

(2) Chess is mandatory in the lower primary school and they seem to be focusing on offering coding a well.

Whilst more and more foreigners are putting their children into Singapore schools, I still think that this will remain small minority, typically for the less well  paid expats. The more well-paid ones will want their children to go to an international school that follows a similar curriculum to other international schools globally  and hence the kids can move to a new school in a new county without any disruption.

OFS has a decent reputation but I think they severely under-estimated how much less attractive the Pasir Riis location is compared to more centrally located international schools.

At the end of the day, OFS is faced with a relatively large fixed cost and needs more students. It is the classic case where you need a certain amount of students to break-even and then after that each additional student is highly profitable. At the moment they are only breaking even.  If the economic cycle turns, then they will be well positioned to take advantage of it as they have significant spare capacity (from memory, they can accommodate another 1000 students) and earnings could rocket but in the meantime, they need to stem the declining student numbers and focus on cash flow break even as well as refinancing their SGD bond in a few years time.

Vested
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#52
Results for the financial year ended 31 December 2016 (FY2016)

Highlights :
* Total revenue of $91.85 million (FY 2016) compared to $97.12 million (FY 2015), Down 5.1%.
* Net profit after taxation for FY 2016 ended at $5.26 million compared to $14.94 million for FY 2015. Down 64.8%.
* The net cash generated from operating activities in FY 2016 was $18.10 million.
* The net cash outflow in investing activities of $1.08 million in FY 2016 was mainly due to additions of property, plant and equipment of $0.82 million
* The proposed FY 2016 final dividend is S$0.020625 per share. It shall be payable on 17 May 2017.

More details in http://infopub.sgx.com/FileOpen/OEL_Fina...eID=439464
Specuvestor: Asset - Business - Structure.
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#53
(16-02-2017, 07:34 PM)cyclone Wrote: Results for the financial year ended 31 December 2016 (FY2016)

Highlights :
* Total revenue of $91.85 million (FY 2016) compared to $97.12 million (FY 2015), Down 5.1%.
* Net profit after taxation for FY 2016 ended at $5.26 million compared to $14.94 million for FY 2015. Down 64.8%.
* The net cash generated from operating activities in FY 2016 was $18.10 million.
* The net cash outflow in investing activities of $1.08 million in FY 2016 was mainly due to additions of property, plant and equipment of $0.82 million
* The proposed FY 2016 final dividend is S$0.020625 per share. It shall be payable on 17 May 2017.

More details in http://infopub.sgx.com/FileOpen/OEL_Fina...eID=439464

It is worth noting that since commencing the school operations from the new school premises at Pasir Ris on 1Jul15, OEL has suffered falling revenue of some 12% in the latest half-year (Jul to Dec16) when compared with the previous run-rate of $50.0m per 6-month semester. Is the worst over?
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#54
The raising of fees has brought some relief to bottom line.

Net cash outflow in investing activities is low as the campus is new. But spending will increase after a few years. By then, maybe the student numbers will have already picked up?

I thought it will be a more prudent move for them to back the bonds, instead of paying dividends. Perhaps they have a plan to manage the bonds maturing in 2019?

Retrenchment data will be a key statistic to watch.
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#55
(16-02-2017, 10:16 PM)karlmarx Wrote: The raising of fees has brought some relief to bottom line.

Net cash outflow in investing activities is low as the campus is new. But spending will increase after a few years. By then, maybe the student numbers will have already picked up?

I thought it will be a more prudent move for them to back the bonds, instead of paying dividends. Perhaps they have a plan to manage the bonds maturing in 2019?

Retrenchment data will be a key statistic to watch.
I tried to extrapolate the Q4 #s by subtracting 9 months #s from the full year #s. Based on that :

Q4 Revenues $21,918 vs $21,788 for Q3 2016 and $23,938 for Q4 2015
Q4 Opex $20,238 vs $21,138 for Q3 2016 and $21,237 for Q4 2015
Q4 PBT of $1,690 vs $650 for Q3 2016 and $2,701 for Q4 2015

There seems to be a historical pattern that revenues are always a bit higher in Q4 than Q3 (not sure why, the school year starts in June, so any impact from higher enrollment should be in Q3 only) so I don't think the above quarter on quarter improvement is anything to get too excited about. However, the lower QonQ opex numbers do suggest that they are focused on what they can control (ie costs). As I have mentioned in previous posts, this school's capacity utilisation is too low and we just need to wait for the global economy to pick up before OFS is likely to see a jump in student numbers. The big challenge is going to be refinancing the bond in 2018.

Vested
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#56
(17-02-2017, 05:07 PM)GreedandFear Wrote:
(16-02-2017, 10:16 PM)karlmarx Wrote: The raising of fees has brought some relief to bottom line.

Net cash outflow in investing activities is low as the campus is new. But spending will increase after a few years. By then, maybe the student numbers will have already picked up?

I thought it will be a more prudent move for them to back the bonds, instead of paying dividends. Perhaps they have a plan to manage the bonds maturing in 2019?

Retrenchment data will be a key statistic to watch.
I tried to extrapolate the Q4 #s by subtracting 9 months #s from the full year #s. Based on that :

Q4 Revenues $21,918 vs $21,788 for Q3 2016 and $23,938 for Q4 2015
Q4 Opex $20,238 vs $21,138 for Q3 2016 and $21,237 for Q4 2015
Q4 PBT of $1,690 vs $650 for Q3 2016 and $2,701 for Q4 2015

There seems to be a historical pattern that revenues are always a bit higher in Q4 than Q3 (not sure why, the school year starts in June, so any impact from higher enrollment should be in Q3 only) so I don't think the above quarter on quarter improvement is anything to get too excited about. However, the lower QonQ opex numbers do suggest that they are focused on what they can control (ie costs). As I have mentioned in previous posts, this school's capacity utilisation is too low and we just need to wait for the global economy to pick up before OFS is likely to see a jump in student numbers. The big challenge is going to be refinancing the bond in 2018.

Vested

Thanks for the extrapolate Q4 numbers, the school year for Overseas Education Limtied is in August instead of June according to para 8 of the result announcement.

"Personnel expenses were $56.04 million in FY 2016 as compared to $57.25 million in FY 2015. The decrease was due to non-renewal of
academic contracts for the new semester commencing in August 2016 due to the lower student numbers."

http://infopub.sgx.com/FileOpen/OEL_Fina...eID=439464

Vested
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#57
(18-02-2017, 12:28 PM)ngcheeki Wrote:
(17-02-2017, 05:07 PM)GreedandFear Wrote:
(16-02-2017, 10:16 PM)karlmarx Wrote: The raising of fees has brought some relief to bottom line.

Net cash outflow in investing activities is low as the campus is new. But spending will increase after a few years. By then, maybe the student numbers will have already picked up?

I thought it will be a more prudent move for them to back the bonds, instead of paying dividends. Perhaps they have a plan to manage the bonds maturing in 2019?

Retrenchment data will be a key statistic to watch.
I tried to extrapolate the Q4 #s by subtracting 9 months #s from the full year #s. Based on that :

Q4 Revenues $21,918 vs $21,788 for Q3 2016 and $23,938 for Q4 2015
Q4 Opex $20,238 vs $21,138 for Q3 2016 and $21,237 for Q4 2015
Q4 PBT of $1,690 vs $650 for Q3 2016 and $2,701 for Q4 2015

There seems to be a historical pattern that revenues are always a bit higher in Q4 than Q3 (not sure why, the school year starts in June, so any impact from higher enrollment should be in Q3 only) so I don't think the above quarter on quarter improvement is anything to get too excited about. However, the lower QonQ opex numbers do suggest that they are focused on what they can control (ie costs). As I have mentioned in previous posts, this school's capacity utilisation is too low and we just need to wait for the global economy to pick up before OFS is likely to see a jump in student numbers. The big challenge is going to be refinancing the bond in 2018.

Vested

Thanks for the extrapolate Q4 numbers, the school year for Overseas Education Limtied is in August instead of June according to para 8 of the result announcement.

"Personnel expenses were $56.04 million in FY 2016 as compared to $57.25 million in FY 2015. The decrease was due to non-renewal of
academic contracts for the new semester commencing in August 2016 due to the lower student numbers."

http://infopub.sgx.com/FileOpen/OEL_Fina...eID=439464

Vested
Yes, you are correct. School year starts in August. My mistake.
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#58
There is a another blog post about possibility of recovery numbers, I think the odds of that happening is low. I remember reading the reduction of number of pupils are mainly the younger children, unless you are going for a renowned school at all costs, because if provide some "through train or  affiliating benefits" parents usually like short communtjng time for their younger children and pasir ris might be be just too far off. 

For the higher level, it is rather sticky because u would want your child to be consistently from middle school onwards be exposed to IB curriculum and get them ready for university when u move ok to another country and continue from there. At the lower levels, it's not so urgent and the local schools, even those unpopular ones, provide rigor in curriculum and teaching. It is also cheaper without subsidies.

I do not think number is recovering and the fact the teachers are let go are also very telling. Teachers are rev generator in education just like outlets are in retail. Letting go of teachers can streamline costs but definitely not expecting uptick in demand
life goes in cycles, predictable yet uncontrollable; just like the markets, but markets give you a second chance
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#59
(13-11-2016, 05:00 PM)justtrying11 Wrote: The only catalyst for this stock is an increase in student numbers, which i have learnt are currently around 2,800. 

Management is definitely trying its best increase student numbers to around 3,500 as it is a key condition for OEL to continue holding its land at Pasir Ris. Don't quote me, but I believe they have a few more years to meet this condition.

Whether it actually happens is another matter altogether.

The BT article mentioned OFS have close to 3,000 students. But there may be an over-capacity issues now. ("Between 2015 and 2020, at least six new building projects for international schools, including expansion of existing campuses, are expected to be completed.")

http://news.asiaone.com/news/business/in...o-students

Monday, Feb 27, 2017

International schools are being built faster in recent years, even though there appears to be no pressing demand for them. Between 2015 and 2020, at least six new building projects for international schools, including expansion of existing campuses, are expected to be completed.

The pick-up in building comes despite a slowdown in the growth of Employment Pass (EP) holders from 9,000 in the year ending December 2015 to 1,700 currently.

Operators of international schools contacted suggest the existing pool of foreign students is still big enough to justify the expansion, but the number of new students enrolled yearly has slipped.

The building expansion is part of a plan to halt the drop and attract more students, according to the operators.
Data from the Ministry of Education (MOE) show there are 33 foreign-system schools in Singapore.
They are private education institutions offering full-time primary or secondary education based on a foreign curriculum.

While these schools have consistently enrolled more than 40,000 new students yearly from 2012 to 2015, the numbers, according to operators, have dropped instead of rising with the increase in EP holders over the same period. Unlike many other countries, Singaporean students are not allowed to enrol at international schools here, except when approved by MOE under special circumstances. Thus international schools here depend almost exclusively on expatriate demand. This demand appears to be flat or declining currently because of the tighter control of foreign-worker inflow in recent years. But Yvonne McNulty, a senior lecturer at SIM University who specialises in global human resources and expatriation, thinks the expat population here is still likely to increase in the long run as the expat numbers rise globally.

She said: "The tricky part is how Singapore defines 'expats' - it's not just EP holders. Anyone not holding Singapore citizenship is technically an expat, and the difference is low- versus high-skilled expats." Dr McNulty said a factor in expat numbers is localisation, as expats increasingly accept localised, open-ended contracts and hold work passes other than the employment pass. They forgo then traditional expat perks such as company-funded housing and schooling, but maintain a higher level of control over their employment. They also tend to stay in Singapore longer, since they are not tied to a particular company and can change jobs locally. Singapore is a leader for this practice in this region, if not the world, with many multi-national corporations here hiring such localised expats, or "lopats", said Dr McNulty.

They may not be included among EP holders, but still contribute to the growing expat population.

Some of the schools have noticed the lopat trend, such as the German European School Singapore (GESS). Maclean Braganza, director of marketing and admissions for GESS, said: "We observe that existing expats may stay in Singapore for longer durations or accept assignments in Singapore on local contracts. These factors bring about a level of demand stability for international schools."

However, because the lopat model may make it harder for parents to afford international school fees - which can average S$20,000 per year - its growing popularity also explains why schools are working harder to impress with their offerings, said Dr McNulty. She said: "Lopats are now funding their own school fees, have a long-term plan to remain in Singapore, and they are savvy consumers - they are looking for the best bang for their buck for their child's education."

Andre Casson, principal of Australian International School (AIS), agreed: "We have a number of students in our school whose parents are on such contracts, and I'm sure they are making sacrifices in choosing to prioritise their children's education. We look to delight parents by providing a quality education for their children."

Meanwhile, some international schools say they are expanding or rebuilding to better serve existing students. An example is the Early Learning Village (ELV), a joint project between Stamford American International School (SAIS) and AIS. The project is currently under construction on the latter's Ang Mo Kio campus.

Mr Casson said: "In larger schools, early learning is often tacked on as an afterthought. We wanted to have a unique, purpose-built facility to cater to children aged six years and younger."

Besides the desire to provide an innovative approach to learning in such a facility, SAIS superintendent Eric Sands said that local interest also played a part in his school's decision to build the ELV. He said: "We are already seeing a keen interest growing from the Singaporean market amongst families who are looking for a more holistic education with facilities and a curriculum which spans opportunities beyond the traditional classroom.

Together with expatriates, there is confidence that this increased supply will meet demand." Unlike primary and secondary school enrolment, enrolment for Singaporean children in international schools at the preschool and kindergarten levels does not require approval from MOE. When fully operational in July this year, the ELV will provide a dedicated environment for SAIS and AIS to conduct their separate early learning programmes. It is expected to nearly double preschool capacity for both schools, to about 800 students for AIS and 1,200 to 1,300 students for SAIS.

Both schools said that they plan to improve facilities and programmes at their current campuses for existing primary and secondary cohorts, before any move is made to enrol more students. Tanglin Trust School, which in 2015 began a campus development plan on the Portsdown Road campus it has occupied since 1981, is one school that has steered clear of expanding capacity for now. Instead, the school has focused on building specialised facilities for existing students, such as art and media technology spaces. Chief executive Peter Derby-Crook said: "The new buildings will bring many more facilities to the school to provide our community with outstanding spaces and resources that match our aspirations for the future."

A few schools have built new campuses because of expiring leases and growing student populations. The Overseas Family School moved from Paterson Road to its Pasir Ris campus in 2015, after a wait of more than 20 years for a permanent location. By the time the school secured its current site, it was operating above capacity in the Paterson Road campus. Today, the new campus serves approximately 3,000 students with a maximum capacity of 6,000 students.

GESS currently occupies two locations at Bukit Tinggi and Jurong Kechil with a combined capacity of 1,700. As the leases for both campuses will expire soon, the school is building a new campus at Dairy Farm with plans for the next 30 years. In 2018, it will consolidate operations in the new campus, which will be able to accommodate 2,000 students. Chatsworth International School, which has branches at Orchard and Jalan Tembusu, will occupy the Bukit Tinggi site vacated by GESS in 2018.

The head of the school, Tyler Sherwood, said Chatsworth is expanding capacity in response to demand, adding: "Younger years and primary school normally receive more inquiries than the secondary school, which is largely due to the nature of families with younger children moving to Singapore." In 2018, the school will close the Jalan Tembusu primary school campus and reshuffle operations between the other two campuses to retain their current format of one primary school campus and another campus for K-12. Overall, capacity will increase by 450 at the primary school campus and 150 at the K-12 campus, which will be the Orchard and Bukit Tinggi sites respectively from 2018.

Meanwhile, the Global Indian International School is building its first fully-owned campus in Punggol, adding to its existing campuses in Queenstown, East Coast and Balestier. The school said the new campus will help shorten waiting lists and provide more tailored facilities, but it declined to reveal exact details until closer to its completion by the end of 2017. Although it may seem counterintuitive, chairman and co-founder of the Global Schools Foundation Atul Temurnikar said that the overall slowing of demand for international schools played a part in his school's decision to build an improved permanent facility.

He said: "During such times, parents have more choices than before, and we are seeing an even greater emphasis on quality of education and facilities for students." So despite the ebbs and flows of the expatriate population here, international schools seem to be taking a long view on their role in the Singapore community.
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#60
Although there is an influx of new international schools, the factor that resulted in OFS downfall, that can also be its strength. Location. I doubt new schools in the far-East location, like Dulwich in the West will affect OFS enrollment.

That being said, I think OFS has yet to turnaround judging by the stagnant number of enrollments.

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