MindChamps posts solid showing on mainboard debut

Toasting the first day of trading for MindChamps shares were (from left) Ms Carmee Lim, MindChamps' mentor principal; Ms Catherine Du, its non-independent non-executive director; Mr David Chiem, its founder, CEO and executive chairman; SGX executive
Toasting the first day of trading for MindChamps shares were (from left) Ms Carmee Lim, MindChamps' mentor principal; Ms Catherine Du, its non-independent non-executive director; Mr David Chiem, its founder, CEO and executive chairman; SGX executive vice-president and head of equities and fixed income Chew Sutat; and Ms Michelle Peh Poh Geok, MindChamps' chief brand officer and group general manager.ST PHOTO: YEN MENG JIIN

Counter closes up nearly 11% at 92 cents; firm set to make first China acquisitions next year

Education firm MindChamps Preschool made a firm debut on the Singapore Exchange's mainboard yesterday.

The counter opened at 84 cents and closed at the day's high of 92 cents, up 10.84 per cent from its IPO price of 83 cents. About 21.7 million shares changed hands.

MindChamps - the largest operator and franchisor of premium-range pre-school centres in Singapore - ended the day with a market cap of $222.3 million. The initial public offering (IPO) price of 83 cents implied a price-to-earnings ratio of 37 times the group's adjusted earnings per share of 2.23 cents last year.

The placement tranche was 21.4 times subscribed and the public offer was 83 times subscribed.

About $34.5 million of the IPO proceeds has been earmarked for expansion, with an immediate focus on China and Australia.

MindChamps expects to make its first acquisitions in China next year, said founder, chief executive and executive chairman David Chiem.

"We will be announcing something quite soon for China," he added. "In fact, China has a few hundred thousand pre-schools. The schools are already there, already licensed. Rather than us going in to set up greenfield (schools) ourselves, together with our cornerstone investors Hillhouse Capital and China First Capital Group, we will acquire and rebrand them all.

"Acquire the hardware, and rebrand to the MindChamps software."

MindChamps has already acquired and rebranded four pre-school centres in Sydney.

Said Mr Chiem: "We are the only early-childhood player that has unique, proprietary, empirically researched curriculum."

MindChamps has no fixed dividend policy, but intends to pay out 40 per cent of its net profit after tax (excluding exceptional items) next year as dividends. Earnings in the six months to June 30 dipped 53.1 per cent to $1.5 million, although revenue rose 4.5 per cent from the same period a year earlier to $9.2 million.

MindChamps collected more school fees from three new pre-schools in the first half of the year, but this was offset by lower franchise income, which tends to be lumpy. No one-off international master franchise licence fees were recognised as revenue in that period.

Singapore Press Holdings (SPH) owns a 20 per cent stake in MindChamps post-IPO. Based on information disclosed earlier, SPH had scooped up a 22 per cent stake in MindChamps for $12 million in 2014. Just ahead of the IPO, it picked up a further 4.84 per cent for $3.96 million.

At yesterday's closing price of 92 cents a share, a back-of-the-envelope calculation shows that SPH is sitting on unrealised gains of around $28.5 million.

Ms Janice Wu, SPH's executive vice-president of corporate development and a non-executive director of MindChamps, said: "Our investee company MindChamps has performed well and grown from strength to strength.

"We are pleased that it has successfully launched its IPO."

A version of this article appeared in the print edition of The Straits Times on November 25, 2017, with the headline 'MindChamps posts solid showing on mainboard debut'. Print Edition | Subscribe