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MindChamps shares up 11% in mainboard debut

CEO says it will acquire 'multiple schools' in China by 2018, and rebrand them

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Celebrating MindChamps' listing are (from far left): Carmee Lim, mentor principal, MindChamps; Catherine Du, non-independent non-executive director of MindChamps PreSchool Ltd; David Chiem, founder CEO and executive chairman of MindChamps Preschool Ltd; Chew Sutat, executive vice president and head of equities and fixed income, Singapore Exchange; Michelle Peh Poh Geok, chief brand officer and group general manager, MindChamps Preschool Ltd.

Singapore

SHARES of MindChamps Preschool made a firm debut on the Singapore Exchange's mainboard on Friday.

The counter opened at 84 cents and closed at the day's high of 92 cents, up nine cents or 10.84 per cent from its IPO price of 83 cents a share.

About 21.7 million shares changed hands.

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MindChamps, the largest operator and franchisor of premium-range preschool centres in Singapore, finished with a market cap of S$222.3 million.

The shares' issue price of 83 cents implied a price-to-earnings ratio of 37 times the group's adjusted earnings per share of 2.23 cents in 2016.

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

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

MindChamps expects to make its first acquisitions in China next year, its founder, CEO and executive chairman David Chiem told The Business Timeson Friday.

"We will be announcing something quite soon for China. In fact, China has a few hundred thousand preschools. 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 re-brand them all," Mr Chiem said.

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

MindChamps has already acquired and re-branded four preschool centres in Sydney, Australia.

Mr Chiem added: "We're 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) in 2018 as dividends. In the six months to June 30, net profit dipped 53.1 per cent to S$1.5 million, although revenue was S$9.2 million, up 4.5 per cent from the same period a year earlier.

MindChamps collected more school fees from three new preschools 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), which owns The Business Times, also owns a 20 per cent stake in MindChamps post-IPO.

Based on information disclosed earlier, in 2014, SPH had scooped up a 22 per cent stake in MindChamps for S$12 million. Just ahead of the IPO, SPH picked up a further 4.84 per cent stake for S$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 S$28.5 million.

Janice Wu, SPH's executive vice-president of corporate development and non-executive director of MindChamps, said: "Our investee company MindChamps has performed well and grown from strength to strength. We are pleased that they have successfully launched their IPO."

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