JT 8.2016This article by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange) was published in SGX's kopi-C: the Company brew series on 27 April 2018. The article is republished with permission.

David ChiemDavid Chiem is the founder, CEO and Executive Chairman of MindChamps PreSchool Ltd, which has 10 company-owned and 44 franchise-operated pre-schools as well as reading-and-writing enrichment centers across Singapore, Australia, the Philippines and the United Arab Emirates. (Photo: Company)

For educator David Chiem, his greatest source of inspiration growing up was a poor, illiterate peasant girl who became a spirit medium for Guan Yin, the Buddhist goddess of mercy.

This was none other than his grandmother, who emigrated to Vietnam from China at a young age, and devoted her life to serving others for zero commercial gain.

"Granny was an extremely spiritual person who was willing to help anyone in need," recalled Chiem, Founder CEO and Executive Chairman of SGX-listed MindChamps Preschool Ltd.

"By the strength of her beliefs, she was an incredible anchor. She helped me define my core values and develop a mindset focused on making a positive impact in people's lives."

The best tool to effect a life-changing transformation, Chiem realised, was education.

"I came from a place where anyone can take everything away from you," said Chiem, referring to the day in 1978 when he - then nine years old - and his family lost their possessions and livelihood as a result of the Vietnam War.

But he always remembered what his father said about the value of education - "The one thing no one can take away from you is your education."

Evicted from their home in southwest Ho Chi Minh City, the Chiems escaped Vietnam in a wooden fishing boat, and ended up in a refugee camp packed with thousands of boat people in Malaysia's Pulau Bidong. Following a narrowly missed opportunity, the family managed to secure asylum in Australia several months later.

LQM C5B5A8The key is continuous improvement and upgrading - we should always be ahead of the curve, but never ahead of ourselves.

- David Chiem

CEO
MindChamps PreSchool

Starting afresh in Sydney was like a rebirth, Chiem said. "I still remember my dad's words - 'For everyone who made it to Australia, someone else died'."

"Growing up with that mindset gave me a sense of purpose, and the determination to make a difference," he added.

In 1984, Chiem became the first Asian teen to bag a leading role in a mainstream Australian television drama series, and subsequently went on to land other roles in famous Australian dramas. Not surprisingly, he chose to pursue his dream to study acting - at the prestigious Theatre Nepean.

He subsequently graduated with a Bachelor of Arts in Communications from Sydney's University of Technology, and a Master of Film-Making from the world-renowned Australian Film, Television and Radio School (AFTRS).

It was in film school that the idea for MindChamps first sprouted. Till this day, he still remembers what the head of film school told his class.

"On the first day, the head told us, 'Congratulations, you're here because you have talent. That's what got you here. But now that you're here, park your talent somewhere else. We're not interested in your talent any more. You're here to learn the craft - because it is the craft that will lift your talent to unimaginable heights'," he recalled.

"That was when I had my epiphany."


Plugging the Gap

Chiem noticed a gap in global education - one involving the mindset of the learner. "All of us spent many years at school, and essentially for five days a week, we were taught the what to learn, but never how to learn," he noted.

"Very rarely do we learn the craft of how to learn, and more importantly, develop the mindset of a learner - to be the best that we can be, and achieve our full potential in all areas of life."

MindChamps, founded as an educational research centre in Australia in 1998, is set to fill that gap by designing for every child a new operating system, one optimised for the age of globalisation and information explosion, where methods of rote learning and memorisation have become irrelevant.

The MindChamps pedagogy - a 21st Century educational system involving the Champion Mind, the Learning Mind and the Creative Mind - was developed in collaboration with global experts hailing from the domains of education, neuroscience, child psychology and theatre.

 

LQM C5B5A8Over the years, many have suggested we introduce a mid-tier brand, but I disagreed and said we should stay focused on the early childhood premium segment. That has helped us to become who we are today.

- David Chiem
CEO
MindChamps PreSchool

It is the only preschool brand globally to work directly with award-winning neuroscientist Professor Emeritus Allan Snyder, founder of the Centre for the Mind at the University of Sydney, and a Fellow of the Royal Society.

In Singapore, MindChamps is the largest operator and franchisor of premium range preschool centres. Following the opening of its first pre-school in 2008, the Group now has 36 centres in the city-state, and holds a 38.5% share of the premium-range preschools market - defined as one that has school fees in the range of S$1,700 and above per month (before promotions and subsidies) for a five-day, or five-and-a-half day week, full-day programme.

In the region, MindChamps opened its first Abu Dhabi nursery in September 2017. It is scheduled to roll out a second centre in Dubai in July, and has plans to launch several more later this year.

Down under, it is focusing on franchising to drive expansion in Sydney and Melbourne, having sold a master-franchise of 20 licenses of reading-and-writing enrichment centres for these two key cities.

Currently, the Group has 10 company-owned and 44 franchise-operated pre-schools, as well as reading-and-writing enrichment centres, across Singapore, Australia, the Philippines and the United Arab Emirates.

Apart from these key markets, MindChamps views the US and UK as potential targets for its global ambitions.

 

star bullet white Expanding Regional Footprint

The Group, which listed on SGX Mainboard last November, has a current market capitalisation of nearly S$200 million. In the 2018 year-to-date, its shares have generated a price gain of 3.8%, compared with total returns of 5.4% and 4.0% respectively for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index.

Under Chiem, MindChamps has bagged several awards in the last decade, including The Influential Brands®' Top Brands Award, and the Superbrands®' Mark of Distinction, for four consecutive years between 2014 and 2017.

The Group reported a 22% year-on-year jump in gross profit to S$15.1 million for the financial year ended 31 December 2017, with a 24% rise in revenue to S$22.8 million.

Stock price  81c
52-week Range 70c to 99c
Market Cap S$194.5m
Price/Book 3.4 x
Price Earnings 32.9 x
Dividend Yield -
Source: Bloomberg

Due to merger and acquisition costs as well as one-off IPO expenses, net profit declined 16% to S$4.9 million.

Looking ahead, MindChamps plans to expand its infant care services, targeted at children between the ages of two and 18 months, as well as Chinese PreSchool Centres, which were established to meet the needs of parents keen to provide their children with a solid foundation in the Chinese language.

Over the last few months, the Group has made further inroads into the region, including Myanmar, Vietnam and China. Its agreement with Vietnam's Evergrande Group involves opening 20 centres in the country, with two expected to launch later this year in Ho Chi Minh and Hanoi. In Myanmar, its franchise deal with Passion Capital Centre will likely culminate in the roll-out of its first centre in Yangon in August.

In early April, MindChamps partnered with a unit of Singapore state investment firm Temasek Holdings to create the MindChamps PreSchool Global Fund. The Fund - 70%-owned by MindChamps - will invest in country preschool funds that will set up and acquire preschools under the MindChamps brand in individual countries.

One such fund is the US$200 million MindChamps PreSchool China Fund, a 50:50 joint venture with Hong Kong-listed China First Capital Group sealed in February. Revenue sources could include franchise income and royalty fees, profits from the master franchise company, and profits from operations as a general partner of the fund.

"China already has the hardware, with their brick-and-mortar schools and enrolled students," said Chiem.

"What they need is software, and we can provide that through the MindChamps-branded curriculum and teacher training."

 

China's Golden Age

The outlook for China's preschool education is indeed bright. "The market is not huge - it's gigantic, with some 260,000 preschools currently. Even with just a 3% share of this pie, the growth potential would be massive," Chiem added.

The implementation of a two-child policy by the Chinese government in 2016 will likely provide another boost, according to Deloitte's 2017 Education Industry Report.

China's preschool education market, which was valued at RMB380 billion in 2016, is expected to exceed RMB540 billion by 2020, as the country's education sector enters a "golden age" of expansion in terms of industry size and market activity, the report noted.

 

LQM C5B5A8China already has the hardware, with their brick-and-mortar schools and enrolled students. What they need is software, and we can provide that through the MindChamps-branded curriculum and teacher training.

- David Chiem
CEO
MindChamps PreSchool

Meanwhile, MindChamps' unwavering focus on achieving pole position in the premium segment of the market has been instrumental to the Group's growth, Chiem said.

"Over the years, many have suggested we introduce a mid-tier brand, but I disagreed and said we should stay focused on the early childhood premium segment. That has helped us to become who we are today."

Essentially, it's all about maintaining the right attitude, he added. "The key is continuous improvement and upgrading - we should always be ahead of the curve, but never ahead of ourselves."

Likewise, Chiem, who co-authored several books, one of which - "Only the Heart" - is now an English literature text for Junior College students in Australia, aims to nurture the right mindset in his son.

"I want to cultivate in him the concept of 100 percent respect and zero fear," he said of his 19-year-old, who is pursuing a major in theatre studies.

"This is because we live in a world where respect is lacking, and judgements and conclusions are formed in a blink of an eye."

Chiem always encourages his son to dig deeper, and seek to understand multiple perspectives. "I want him to have the confidence to find his true self. Many kids today live shackled lives, conforming to the judgments of others, and imprisoned by the fear of failure."

It boils down to discovering and celebrating what is unique in every individual, which constitutes the essence of the MindChamps philosophy, he noted.

"Every child comes into this world with something special. It's important that he finds his own voice, unearths the champion in himself, so he can achieve his full potential and contribute to society."


Financial results

Year ended 31 Dec
(S$'000)
2017 2016 2015 2014
Revenue 22,791 18,418 12,439 10,784
Gross Profit 15,135 12,444 8,242 6,621
Net Profit 4,890 5,833 3,746 2,864



Half-year ended 30 Jun (S$'000) 1HFY2017 1HFY2016
yoy chg
Revenue 9,203 8,773 4.9%
Gross Profit 5,352 6,066 -11.8%
Net Profit 1,496 3,161 -52.7%

Source: company data and IPO prospectus

 


Outlook & Risks
  • Following its recently announced plans to expand into China, Myanmar and Vietnam, MindChamps is expected to further establish its network of early childhood and enrichment centres already in Singapore, Australia, Philippines and the UAE.
  • MindChamps' entry into China, together with HKEX-listed China First Capital Group by way of the proposed China Preschool Fund that is targeted to raise US$200 million, will see it receive revenue from the following income streams:
    1. franchise income and royalty fees
    2. profits from the master franchise company
    3. returns from investment in the China Preschool Fund, if the Group invests as a limited partner
    4. profits from the operations of the general partner of the China Preschool Fund
  • MindChamps, which did not issue a dividend in FY2017, intends to recommend and distribute dividends of at least 40% of the Group's net profit after tax (excluding exceptional items) in FY2018 to reward shareholders for participating in its growth. However, these statements do not constitute legally binding obligations on the Group or legally binding statements in respect of its future dividend policy.


MindChamps PreSchool Ltd

MindChamps PreSchool holds the Number One position in the premium range preschools market in Singapore, with a share of 38.5%. Its growing global presence includes premium preschools and enrichment centres in Australia, Abu Dhabi, Dubai, Philippines, and soon Myanmar, Vietnam and China.

Based on a cutting-edge, scientifically researched curriculum, MindChamps is helmed by a highly experienced management team and an esteemed World Advisory Board, chaired by world-renowned neuroscientist Professor Emeritus Allan Snyder (Fellow of the Royal Society). MindChamps is the only educational institute to collaborate with Professor Snyder on the empirical research of the three minds model of education - the Champion Mind, the Creative Mind and the Learning Mind - which is uniquely built into its curriculum. The Group's unrelenting commitment to excellence in cultivating young minds has led to the organisation being honoured with some of the most sought-after awards in the Singapore education sector, as well as industry-wide recognition in the fields of intellectual property, franchise management and branding.

This includes winning both the Influential Brands®' Top Brands Award and the Superbrands®' Mark of Distinction for four years in a row (2014-2017), ranked top 1000 of Singapore companies for five consecutive years in Singapore SME 1000 Awards (2011-2015), and most recently ranked 8th out of 50 top companies in the 2017 Enterprise 50 Awards, as well as bagging the 2017 Dun & Bradstreet Business Eminence Awards.

 

For the company's financial results for the year ended 31 December 2017, click here.

The company website is: www.mindchamps.org.

The ccompany's Stock Facts page is here.

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