SINGAPORE (July 11): MindChamps PreSchool, the largest operator of premium range preschool centres in Singapore, has a market share of 38.5%, based on number of private childcare centres.
It is also the only preschool operator to own intellectual property on the Champion Mindset.
With this, the group has caught the attention of Maybank Kim Eng.
In an unrated Monday report, analyst Eric Ong says, “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.”
According to the group’s franchise model, it charges franchisees a fixed percentage of its revenue, allowing it generate high financial returns without bearing operational costs of the centres, this effectively leveraging on the cash flow of franchisees.
The group has sold 165 licenses under unit franchise agreements and master franchise agreements to-date.
“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,” says Ong.
On the other hand, MindChamps is also in a partnership with Temasek-linked, Pavilion Capital, to create a global fund that will invest in country preschool funds to set up and acquire preschools in individual countries.
See: MindChamps and Temasek subsidiary set up fund to acquire and set up preschools
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Earlier in February, the group also entered into a joint venture (JV) with China First Capital Group to acquire and establish preschools in China.
See: MindChamps PreSchool sets up US$200 mil fund to establish and acquire preschools in China
Currently, based on consensus estimates, the stock is trading at about 18 times FY19 earnings, implying more than 30% discount to its peer average of 26 times.
“While the market is generally positive on the group’s growth prospects, we are cognisant that this will take time to bear fruit in view of the initial costs and gestation period especially for its overseas expansion,” says Ong.
As at 3.00pm, shares in MindChamps are trading 2.5 cents lower at 70 cents.
