MindChamps shares jump 11% in Mainboard debut; CEO says will enter China by 2018

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

The counter opened at S$0.84 and finished at the day's high of S$0.92, 10.84 per cent above its S$0.83 IPO price.

About 21.7 million shares changed hands.

MindChamps, the largest operator and franchisor of premium range preschool centres in Singapore, had a market cap of S$222 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 Singapore cents in 2016.

The placement tranche was 21.4 times subscribed and the public offer was 83 times subscribed, so most successful retail investors were allotted only 1,000 or 2,000 shares.

Some S$34.5 million of the IPO proceeds has 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 Times.

"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. Acquire the hardware, and rebrand to the MindChamps software," Mr Chiem said.

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.

In 2014, SPH 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 S$0.92 a share, SPH is sitting on paper gains of S$28.5 million.

Ms 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."