My parents used to keep telling me how important an education was for our future. It is the foundation of our success and it is no doubt that education is responsible for the success of Raffles Education Corporation (RafflesEdu). In its FY08 results, RafflesEdu once again displayed a stellar performance with revenue rising 53.2% from $124m to $190m while PATMI surging 100.3% to $98.8m from $49.3m.

SUCCESS BY DESIGN

Led by its founder and chairman Chew Hua Seng, RafflesEdu started off in 1990 as a design school in Singapore providing premier education in professional courses such as fashion design, interior design and multimedia design. By tapping into its renowned design courses, RafflesEdu expanded overseas, spanning colleges across more than 8 countries. Today, RafflesEdu is the largest education service provider in the Asia Pacific with over 15 international colleges excluding its PRC acquisitions.

RafflesEdu has since expanded into business management, psychology and science courses, offering a range of certifications, from diplomas to PhDs. Currently, RafflesEdu has a total of over 29,000 students and 55 international admissions offices worldwide, with a market capitalization of $1.8b.

DELISTING OF HARTFORD & CHINA EDUCATION

Recently, RafflesEdu delisted its two subsidiaries, Hartford Education Corporation (Hartford) and China Education (CE) from the SGX. The delisting of the two listed companies was to streamline the entire education business. By combining the three entities into one, RafflesEdu consolidated its assets and reduced labor and operating expenses, allowing it to restructure the organisation.

The consolidation also allowed RaffleEdu to create synergy by combining the students from both Hartford and CE into similar courses already taught at RafflesEdu, resulting in greater cost savings and better usage of its property. Notably, course fees at RafflesEdu are also higher than both Hartford and CE, which translate into higher revenue for the group.

GROWTH THRU’ ORGANIC & ACQUISITIONS

RafflesEdu made several acquisitions during the past 2 years, mainly focusing in the PRC, the most notable being Oriental University City (OUC). OUC is located in Langfang City, Hebei Province with a land area of 3.31m sqm and built up space of 1.04m sqm. It houses 19 colleges and has a student population of over 54,000 students. A pre-tax profit guarantee of Rmb100m in 2008 and Rmb140m in 2009 was provided by the sellers who will also apply to the China Ministry of Education to obtain the necessary approvals for the establishment of a private university, a private college and two Sino-foreign cooperative schools. Currently, RafflesEdu is still in the process of converting students in OUC into its own.

Recently, RafflesEdu received approval from the Hebei Province Education Bureau to establish Langfang Oriental College in OUC and a separate approval from the Yunnan Province Education Bureau to establish a joint cooperative education project in Kunming, Yunnan Province with Yunnan Nationalities University. Both colleges will provide mainly advanced diplomas in design and business management courses. Total capital expenditure for both colleges is Rmb6m, for the next five years.

RafflesEdu’s FY08 results reflected its ability to sustain its earnings even though several companies are struggling in this period of turmoil. The increase in revenue was attributable to rise in student enrollment, increase in course fees and contributions from the newly acquired OUC & Shaan Xi Electronic Information College (ShaanXi). Students under the Raffles International College (RIC) brand grew 10.1% from 9,720 to 10,700 students. Excluding contributions from OUC and ShaanXi, RafflesEdu’s revenue and PATMI would be $163.8m and $69.5m, an increase of 32% and 40.9% respectively. Revenue from OUC and ShaanXi were $26.2m, which equates to 13.8% of FY08 revenue.

Course fees for all colleges ex Australia and New Zealand are expected to rise by 10% for new student enrollments. Based on a three year advanced diploma cum degree program, current course fees in PRC would rise from Rmb74,400 to Rmb81,800 per year in average. Education service fees charged on OUC students would rise from Rmb1,500 to 2,100. This would raise FY09 revenue by RMB34.2m based on the 57,000 students currently studying and this revenue is tax free.

PROPOSAL TO LIST IN HK

RafflesEdu proposed to list a part of its PRC operations on the Main Board of the Hong Kong Stock Exchange (HKE) to unlock the value of its investments in the PRC operations. Proceeds from the IPO will be used to pay for part of the $162.6m short-term borrowings that RafflesEdu is slated to pay by FY09 as it will not issue new shares to raise capital in the near future.

LOOKING INTO THE FUTURE

Chew hopes that student numbers reach 108,000 by FY2009, after taking into consideration the conversion of 57,000 students from OUC and an increase of 20,000 new enrollments. According to him, RafflesEdu currently would focus on the India JV with Educomp Solutions and the listing of RafflesEdu in the HKE.