MindChamp PreSchool (MCHAMPS) - Maybank Kim Eng 2018-07-09: Planting Seeds For Future Growth

Mindchamp PreSchool (MCHAMPS) - Maybank Kim Eng Research 2018-07-09: Planting Seeds For Future Growth MINDCHAMPS PRESCHOOL LIMITED SGX:CNE

Mindchamp PreSchool (MCHAMPS) - Planting Seeds For Future Growth

Largest operator of premium range preschool centres in Singapore

  • MindChamps currently holds pole position in the premium range of preschools in Singapore, with a market share of 38.5% (based on number of private child care centres). It is also the only preschool operator to own intellectual property on the Champion Mindset. 
  • With its entrenched position in Singapore, the group is well-positioned to ride on the growth of the early childhood education industry in Australia, China and globally.

High proportion of recurring revenue via its franchise business

  • By charging franchisees a fixed percentage of their revenue, its franchise model allows the group to generate high financial returns without bearing the cost of operating the centres, thereby effectively leveraging on the cash flow of its franchisees.
  • To-date, it has sold a total of 165 licences under unit franchise agreements and master franchise agreements.
  • Longer-term, management aims to achieve the majority of total turnover from its Franchise segment, which offers high scalability, minimal capex, and higher margin compared to its Education segment.

Fund management model provides scalability and multiple income streams

  • Meanwhile, the group is also partnering with Temasek-linked, Pavilion Capital to create a global fund that will in turn invest in country preschool funds to set up and acquire preschools in individual countries. One such country preschool fund is the China Preschool Fund, which is a JV between MindChamps and China First Capital Group, inked earlier in Feb-18.

Valuation & risks

  • Based on consensus estimates, MindChamps trades at almost 18x FY19E P/E, which implies more than 30% discount to its peer average of 26x.
  • While the market is generally positive on the group’s growth prospects, we are cognizant that this will take time to bear fruit in view of the initial costs and gestation period especially for its overseas expansion.

Target Price: N/A

Eric Ong Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2018-07-09
SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998