SINGAPORE (Apr 5): KGI Research is starting MindChamps, the provider of premium preschool education, on "buy" given strong market demand.
In Singapore, the group has top 38.5% market-share of the premium-range preschool market.
This year, MindChamps will make a foray into China after signing a JV with First Capital Group (CFCG).
Like Singapore, KGI says academic competition in China is intense and demands for pre-schools are growing quickly.
"We believe MindChamps' strong branding -- coupled with the US$200 million ($263 million) fund with CFCG -- will provide the necessary ammunition to lead the charge in China," says analyst Marc Tan in a Thursday report.
MindChamps is partnering CFCG to launch a US$200 million fund for opening and acquiring preschools in China.
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The 50-50 joint venture will acquire existing preschools in China and operate them under the MindChamps brand to provide bilingual education -- English & Chinese -- in China’s burgeoning early childhood education market.
According to Tan, China's market for early childhood education is forecast to expand to RMB540 billion ($112.5 billion) by 2020 from RMB380 billion in 2016.
In the battle to educate and nurture Generation Z, Tan says rote-learning methods are growing out of favour with post-80s parents who want their children to receive a well-rounded education at an early age. These parents are well-educated and spend at least 40% of their monthly expense on preschool education.
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In light of this, he believes MindChamps’ strong branding and science-backed curriculum will allow the firm to capture market share in China.
"We also expect MindChamps’ experience with educating children for Singapore’s bilingual education system to give them an edge over other international preschools in China," says Tan.
KGI is assigning MindChamps a target price of 86 cents, implying 23.2 times FY18 earnings compared to its peer average of 27.2 times.
As at 2.33pm, shares in MindChamps are up 5 cents at 78 cents.
