SISB showed steady growth throughout 3Q24 and expected improving performance in 4Q24 as the student number approaches 4,600 targeted by the company this year: 52% increase in Nonthaburi; 18% in Chiang Mai, and 13% in Rayong, according to a note from Tisco Securities. The company has raised its tuition fees by 5% preparing for the academic commencement in August.
SISB PCL. (SET: SISB) started to profit in 4Q23 from the Nonthaburi branch which has 480 current students. The Rayong branch with 156 students is expected to break even within 2 years or when 250 students attend, whereby the branch has been promoted to Chinese students, provided major enrollments of Chinese students at Pracha Uthit and Chiang Mai branches.
Nevertheless, the acquisition of English language centers through a mergers & acquisition deal (M&A) has been stalled due to excessive valuations. Meanwhile, the company proceeds with the expansion of existing branches, anticipating 1,800 more seats in 2024-2025.
On that note, SISB will be implementing three projects in its ESG policy: namely, 1) 2.04 megawatts energy-saving chains installation at the Thonburi branch, Pracha Uthit branch, and the head office, to reduce carbon emission by 20%; 2) implementation of a food-waste system to turn leftovers into organic compost, expecting 450 kilogram a day taken care of at the Pracha Uthit and Thonburi branches; and 3) a corporate social responsibility (CSR) initiative to provide free English lessons in collaboration with local districts, expecting 100 students per annum with the target at 1,200 students by 2028.
Increase in net profit can be expected in 3Q24 with earnings CAGR forecasted at 32% over two years due to expansion and addition of branches, as well as greater number of student enrollments and the commencement of a new academic term – estimating net profit growth at +39% year-over-year in 2024 and +25% year-over-year in 2025. Moreover, tuition fees are expected to increase by 7% on average as per the adjustments and a higher number of students in the primary and secondary levels – reckoning the number of students grows by 405 and 410 in 2024 and 2025, respectively.
Due to its successive growth and performance, coupled with the abovementioned expansion into prime locations and comparatively affordable tuition among other international schools, “Buy” on SISB is recommended by Tisco Securities. On top of that, SISB plans to enact a “Halving Project” to establish international schools with lower rates in pursuit of more market shares from bilingual students. The broker set a target price at THB 50, derivative of the DCF method: 8% WACC with 1.5% terminal growth; equivalent to 1.3x PEG in 2024.
