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Broker's take: RHB maintains 'buy' on MindChamps on expansion plans

RHB Research is maintaining its "buy" call on MindChamps Preschool, as the preschool operator continues to expand overseas with six new acquisitions in the year to date, the research firm said in a Tuesday report.

RHB analyst Juliana Cai said that the new centres are expected to contribute positively to second-half 2018 results and will help MindChamps build brand awareness in Sydney, where they are all located.

She recommends an unchanged target price of S$0.94 with 54 per cent upside, based on a blended valuation methodology comprising a target enterprise value/earnings before interest, tax, depreciation and amortisation (EV/Ebitda) of 18 times, which is in line with the peer average, and discounted cash flow.

MindChamps now has 10 centres in Australia and plans to expand further in the country, as well as into Malaysia through its newly appointed franchisee Victoria Education, and into China through the China Preschool Fund.

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Victoria Education is expected to open 20 MindChamps preschools in Malaysia by 2024, with the first to start operations in Johor Baru in 2019.

Under the China Preschool Fund, MindChamps plans to start acquiring preschools in China in November and run two brands: one with the full MindChamps curriculum, and another sub-brand called Powered by MindChamps consisting of a normal curriculum with enrichment courses by MindChamps.

Shares of MindChamps were trading at S$0.615 at 10.12am, up 1.5 Singapore cents or 2.5 per cent.