JayMiSon: Do you seriously think Oei Hong Leong sees no fundamental reason for buying RE?
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[JayMiSon 13-09-2012]:
Both.
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[Harry 13-09-2012]:
Raffles has shot up again today. It makes me wonder if people are just rushing in blindly -- is it just herd mentality? And the charismatic leader of the herd being OHL.?
I have a scenario, though not highly plausible, that Oei is accumulating some S-chips. This guy used to do business in China, so he knows the environment.
One day, he will emerge as the new substantial shareholder of ....(fill in the blanks).... stock.
Then the stock(s) will fly. And the who S-chip sector will suddenly be short of stocks that trade at PE of 2-3-4-5 X.
It's a lazy afternoon and I am just indulging in wishful thinking.
I don't see any sign of turnaround. If you look at its Q1 2014 vs Q1 2013, the profit in Q1 2013 come mainly from $18 million gain from disposal of investment. Therefore as long as its quarter revenue stay around $32 million, the risk of running into a loss is there.
If you look at its cash flow, you will notice that the positive inflow come from "Course and education service deferred income" of $34 million.
I believe this is the fees paid in advance by its students. With this component, its cash flow from operations is negative.
If you look at its full year numbers for year ended 30 June 2013, its net profit had include FV gain of $42 million.
With that, FY June 2013 will be a loss of about $7 million.
Free cash flow for full year is negative at $14 million vs prior year at negative $6 million.
Its Chairman, Chew Hua Seng should stay focus and not meddle with business outside the sphere of its core business. Otherwise, when things get worse, it is difficult to reverse. Don't try to be smart and think that he knows everything.
Just look at Overseas Education Ltd, and see how they perform and manage its business. Keep it simple and improve on its core competencies.
Raffles Education announced a CHF 29.1m (approximately
S$39.8m) acquisition of a hotel and facilities, seven commercial units and a plot of land with teaching building and dormitories, in Nendaz, Switzerland to establish a hospitality management school, a design school and a Swiss International Baccalaureate school, marking its maiden entry into Europe.
The Hotel and the seven commercial units sit on a total land area of 5,910 sq m with a built-up area of 9,895 sq m. The commercial units are located on the ground floor of the hotel complex, occupying 911 sq m. The acquisitions are value-accretive and will have a positive impact on Raffles Education’s current financial year.
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