CIMB Report - 15 Jan 2008

What’s on the table

Raffles Education Corp (S$2.79) - Initiating coverage - In a class of its own We resume coverage with Outperform and DCF-based (10.1% WACC, 3% terminal growth rate) valuation of S$4.00, implying 43% upside.

REC runs 29 colleges in the Asia-Pacific under five education brand names with total enrolment of some 44,000 students, making it one of the largest publicly-listed education companies in Asia with a diversity of courses that include design, psychology, business management, as well as vocational and technical education in nine countries.

Key investment highlights include:

1) Earnings CAGR of 45% over FY08-10, underpinned by economies of scale from operating leverage, organic growth and contributions from recent acquisitions;
2) Successful execution of OUC is critical; and
3) Potential catalysts could come from S$200m worth of acquisitions per year over three years.

In the event that REC's proposed one-to-two stock split is approved, our target price could be adjusted to S$2.00.

Quick Takes

· Jiutian Chemical Group (S$0.27) - Weak industry pricing power…for now
· Chemoil Energy (US$0.4 - New Chairman/CEO appointed
· Singapore Press Hldgs (S$4.60) - 1QFY08 results - Steady earnings delivery

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