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Raffles Education Corporation Limited - Can it succeed in Sri Lanka, after it failed in China?

24/4/2013 – Raffles Education Corp will invest S$25 mln over five years to set up a private university in Sri Lanka.

While there are few other details, Chairman, CEO and 34% owner, Chew Hua Seng, says Sri Lanka is an emerging market filled with opportunities, thereby increasing demand for university education.

The group operates in 13 countries, including Sri Lanka, with almost 30 education units.

Raffles Education has benefited from Sri Lankan government’s imitative to set up non-state universities through the Board of Investment.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question
Question

1. Can it succeed in Sri Lanka, after it failed in China?

Raffles Education bought Oriental University City north of Beijing some years ago – but this did not turn out the way it wanted.

Certainly, Chinese students are pursuing higher education in greater numbers.

But first, many of them study outside China.

And second, more are being accepted into National Education System universities.

This has led to a decline in revenue from China for private colleges such as Raffles Education.

This was evident in declining revenue from China.

It fell 21% for FY12 mainly due to the absence of contribution by Shaanxi Electronic Information Institute, and a 50% contribution from Zhongfa College following the disposal of 50% interest in Value Vantage Pte Ltd.

Question
Question

2. Does prior presence in Sri Lanka put Raffles Education in a better position than others?

Currently, there are 30 Sri Lankan universities.

Ten foreign universities have submitted applications seeking approval to set up business.

They are mainly from the countries such as the United Kingdom and India.

Hence, competition would be cut-throat.

But Raffles Education has been doing business in Sri Lanka since 2010, so it will be aware of Sri Lanka’s demographics and limitations.

For example, only 17% of those who qualify for university education gain admission to state-funded universities, due to the limited places.

Each year, more than 100,000 potential students are forced to abandon their ambition to enter a university.

But the problem is Raffles Education only offers two-year advanced diploma programmes.

So, does it have enough experience to give it a competitive edge?

Question
Question

3. Has it acquired a land for the construction of its university?

In the press release, in which Raffles Education announced its plans to invest S$25 mln over five years, it gave scant details about how it was going to build the university, and whether it had acquired land for the campus.

There is no word on how big the campus will be, or how many students it will be able to accommodate.

We don’t even know where in Sri Lanka it is to be built.

However, the government is offering land and tax breaks for well recognized international higher education institutes to set up shop in Sri Lanka.

Question
Question

4. What is the expected break even period for its investment in Sri Lanka?

This is another piece of information that was not revealed – which investors need to know.

We don’t even know when the first intake of students will be.

And, what internal targets were discussed at board level, before the S$25 mln were committed?

Question
Question

5. How is it financing this investment?

Will it part finance it from the S$80 mln loan it borrwed last February?

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Question

6. Will it hire foreign lecturers?

With ten universities vying to set up campuses in Sri Lanka, it will have to compete with public and private universities for lecturers, tutors, and other staff.

But private universities would probably be able to pay more to hire good lecturers, including from abroad.

This cost will be difficult to pass on to students, who expect a good quality education but who might not be willing to more than at public universities.

Hence, our question.

This also leads to our next question:

Question
Question

7. How will it manage to keep fees at a competitive level?


We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

Sofar, we have not had a reply (which is why you are seeing this message).



©2013 Investor Central® - a service of Hong Bao Media