DBSVickers Report - 28 Nov 2007

Raffles Education Visit to China acquisitions

Story: We paid a visit to RLS’ acquired schools and campuses in China last week, including Oriental University City in Hebei, Boustead College in Tianjin and Shanghai Zhongfa in Shanghai.

Point: The visit gave us a better idea of the size and scope of the Group’s acquisitions in China, and in particular, the potential for growth in contribution from these businesses. We were also impressed with the depth in number of high quality managers that RLS has in place to manage these acquisitions. In summary, we came away from the visit more upbeat about the prospects of RLS, with increased confidence about the Group’s ability to execute.

Relevance: We continue to like Raffles Education as an education play, with strong growth prospects in China and Asia. We maintain our BUY recommendation and S$3.72 target price, based on DCF (WACC 9.1%, terminal growth 3%).

Advance Sct Limited Higher earnings growth to offset equity dilution

Story: Advance SCT has completed the placement of 50m ordinary shares at an issue price of S$1.01 per share, which should be listed on SGX today.

Point: Proceeds of S$50.5m would be used for (1) acquiring additional capacity for smelter and recycling (2) funding working capital requirements. In addition, management has guided for better margins per tonne at the smelter in China, by virtue of securing the licence for importing scrap copper in China. As such, we are conservatively raising our FY08 and FY09 earnings estimates by 10% each based on lower interest burden, higher margins at the Chinese smelter and potential buy-out of minority stake in Malaysian smelter.

Relevance: Maintain BUY at one-year target price of S$1.40 based on 14x fully diluted FY08 EPS. We see a very healthy upside of over 42% at the current stock price. Potential acquisition announcements would be the catalyst for the stock price.