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The key number to look at is registration fees. All new students pay an upfront registration fee. That number gives you an indication of whether new student numbers are increasing or flat. In this case, it is flat. My guess is that the revenue number is slightly up because tuition fees have increased (as has been the case across most big international schools). They have done a good job cutting costs and finance costs but the school is operating way below capacity. The company needs to grow student numbers to increase profits. If they cut teachers' salaries, the quality of teachers will suffer and students will leave for other international schools.
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13-11-2019, 10:33 AM
(This post was last modified: 13-11-2019, 10:34 AM by AQ..)
Under Pt 1b)
"An unsecured 10-year bank term loan facility of $117.75 million was utilised to fully redeem the remaining outstanding Company's Bonds of $117.75 million on 17 Apr 2019. The bank loan shall be repaid in quarterly instalments of $1.54 million per quarter, and interest calculated at the prevailing bank's offer interest rate on the outstanding loan balance. The first quarterly instalment of $1.54 million and interest of $1.08 million, totalled $2.62 million, was paid in Q3 2019."
=> This works out to be ard 3.8% in interest rates, vs 5.2% for their previous bond.
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De-leveraging works wonder on their P&L too. If they become a zero debt balance sheet, their earnings will effectively double. The wild card is on students registration because a decline will offset any interest expense cut and operating leverage hurts badly for OEL.
The fact is there is an oversupply of international schools and expat inflow has structurally changed. An investor needs to work out if this is of any asymmetric benefit or not.
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14-11-2019, 04:26 PM
(This post was last modified: 14-11-2019, 04:27 PM by dzwm87.)
My sense is OFS is an "interim" FSS for the prestige names - i.e. parents who will enroll their kids while queuing for more prestige schools like SAS. So "churn" should be higher for OFS.
Gone are the old days of expat remunerations. I think it might be too aggressive to assume the industry will return to its good o'days.
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full year result out on 13 Feb, 4Q number look stable vs previous quarter, dividend maintained at 2.75c yielding 7.5% at the latest price of $0.365
4Q tuition fees is stable and slightly higher than 3Q
note 3Q is the first time tuition fees arrest the year on year decline after 20 straight quarter (i.e. 5 years) of year on year decline, latest 4Q affirm that the new school year from Aug has brought overseas edu into an improved student enrolment environment