|Bid||0.2900 x 0|
|Ask||0.2950 x 0|
|Day's range||0.2900 - 0.2900|
|52-week range||0.2700 - 0.3600|
|Beta (3Y monthly)||0.36|
|PE ratio (TTM)||17.06|
|Forward dividend & yield||0.03 (9.65%)|
|1y target est||0.42|
SINGAPORE (May 10): Lim & Tan Securities has started coverage on Overseas Education Limited (OEL) at “buy” with a target price of 48 cents, representing a 60% upside potential from the stock’s 30 cent share price.In an initiation report on Wednesday, the research house says it expects OEL’s current cash flows and huge cash balance could be used to maintain dividends of 2.75 cents, due to lower capital repayment after refinancing its $117.75 million bond at favourable rates.Lim & Tan is also of the view that OEL’s decline in student numbers have largely stabilised post its campus shift from Orchard to Pasir Ris, and henceforth will see improvements in financials moving into FY19.In spite of a projected revenue decline of 4% in FY19, it expects the group’s profit to grow by 8.1% for the year due to cost-cutting initiatives and a reduction in interest expense.Further, at OEL’s current “undemanding” valuations of 0.87 times P/B and a 14.9 times forward P/E, Lim & Tan sees room for a share price run-up as it believes the market has yet to fully absorb the tapering student number decline as well as the favourable terms of its successfully refinanced debt. “Despite top-line declines in growth, OEL has always managed to be profitable due to their flexible business model that allows them to scale back on teaching staff due to lesser students. Additionally, OEL has a very cash-generative business as students pay for tuition fees before commencement of education,” notes the research house.“As a non-traditional business, we think that PE is not the best valuation tool to value OEL. Due to its stable dividend payments and cash flow generative business, we have thus adopted the DDM and DCF valuation approach to fairly value OEL,” it adds.Shares in OEL closed 1.67% lower at 30 cents on Thursday, or at 0.9 times FY19F book value.
SINGAPORE (May 8): UOB KayHian is keeping its “buy” call on Overseas Education (OEL) with a target price of 46 cents. OEL yesterday announced that its 1Q19 earnings have increased by 9.65 to $2.1 million, compared to $1.9 million in 1Q18. Total expenses also dropped 9.2% y-o-y to $14.4 million, due to lower financing costs and personnel expenses.
SINGAPORE (April 23): UOB Kay Hian is starting coverage on Overseas Education Limited (OEL) at “buy” with a 46 cent price target, based on 10.4 times EV/EBITDA or a 15.4% discount to global peers’ 2019 average.In an initiation report on Monday, analyst John Cheong says he deems the stock’s valuations attractive at its current 8.3 times 2019F EV/EBITDA and an 8.2% dividend yield.Cheong views this yield level as sustainable due to OEL’s strong operating cash flows despite the recent relocation of its Orchard Road campus to Pasir Ris due to lease expiration.Although the move has caused a “huge decline” in student numbers, he likes how OEL has kept its operating costs in check to result in improved EBIT margins and operating cash flows in recent years. “We expect 2019 to be the third consecutive year of recovery with net profit growth of 11.2% y-o-y, as the rate of decline in student numbers continues to narrow while significant cost savings from loan refinancing kick in. The revenue decline narrowed from 5.4% in 2016 to 4.5% in 2018 and we expect it to narrow to 3.1% in 2019 as OEL starts to establish its brand name at its new campus.” says Cheong. The analyst is expecting cost savings of around $3.3 million from the refinancing of OEL’s borrowings, and a further reduction of operating costs this year. “We believe the market has overlooked OEL’s track record in manoeuvring through challenging times, and its ability to maintain annual dividend payment of 2.75 cents per share and pare down debt at the same time. Further improvement in profitability track record and wider analyst coverage should help OEL rerate upwards,” he concludes.As at 11:07am, shares in OEL are trading 1.5% lower at 33 cents or 0.98 times FY19F book value.
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