Broker's take: KGI initiates coverage on MindChamps with 'buy'

KGI Securities on Thursday initiated coverage with a "buy" call on MindChamps, noting upside from the preschool-education counter's foray into China.

The brokerage noted that MindChamps has partnered China First Capital Group (CFCG) to launch a US$200 million fund for opening and acquiring preschools in China. The 50:50 joint venture will acquire existing preschools in China and operate them under the MindChamps brand to provide bilingual education (English and Chinese) in China's burgeoning early childhood education market.

It considered MindChamps' entry into China as the strongest growth driver for the education counter's revenues going forward.

"The Chinese market for early childhood education is forecast to expand from 380 billion yuan (S$79.1 billion) in 2016 to 540 billion yuan by 2020.

"We believe MindChamps's strong branding and science-backed curriculum will allow the firm to capture market share in China," a KGI Securities research note stated.

The brokerage flagged, however, the downside risks from among others, the failure to raise enough capital for the US$200 million fund launched by MindChamps and CFCG.

MindChamps traded at 77 Singapore cents as at 12.48pm on Thursday, up three cents.

The Business Times highlights certain brokers' reports based solely on newsworthiness, which includes significant developments in the stock, changes in ratings and target prices, and the recency of the report. Nevertheless, readers should be aware that Singapore Press Holdings, which owns The Business Times, is also a significant shareholder of MindChamps.