Lim & Tan Securities sent out this note to clients on 19 Dec 2019, following which the stock price rose 14% in two days.

OEL students AR2018OEL operates Overseas Family School, a leading private foreign system school in Singapore with an operating history of over 25 years.
Photo: Annual Report 2018
We are highlighting an interesting article from the Financial Times that 
could have positive implications for Overseas Education Limited / OEL ($0.32, unchanged), one of our key 2019 stock picks.

The Financial Times article said that for Mandy Graham, the university sieges in Hong Kong last month pushed her over the edge.

The British 
teacher decided to send her five-year-old daughter back to the UK to start school and stay with her grandmother after the road they live on was blocked by protesters and tear gas engulfed her garden.

“It was an 
absolute nightmare living where I live. It’s the point when . . . you think, nope that’s enough,” Ms Graham said.


Ms Graham’s experience has been mirrored across the Asian financial centre in recent weeks as pro-democracy protests have descended into violent confrontations between demonstrators and police. Hong Kong, where expats form a significant part of the fi nancial services sector, has long been an attractive place for executives looking for high salaries, a fast-paced lifestyle and lower taxes.

But the clashes have forced many to reconsider whether to stay. The closure of schools for a week was a moment when parents started to 
look more seriously at leaving. International schools in Singapore — a potential alternative location in the region where many companies that have offices in Hong Kong also have a presence — have been flooded with inquiries from Hong Kong-based families.

Applications and tour 
requests to the Singapore American School, for example, have jumped 25 per cent since mid-October, driven by Hong Kong families, said Treena Casey, director of admissions.

“We are receiving approximately 10 phone calls a day with inquiries on space and capacity from people situated in Hong Kong,” she added.

In a 
sign of how urgently parents were considering leaving, many requested January admission rather than waiting until the start of the new academic year in August. “They upped the ante. They’re saying, ‘We want out now and want to be able to start in January’”, she said.

Western expats are not the only ones looking for an exit. After the university sieges, the Hong Kong Japanese Chamber of Commerce and Industry carried out a survey of 270 Japanese companies operating in Hong Kong and found that 6 per cent of its expat workers in the city had sent their families home and 33 per cent were also considering doing so.

For many, said one diplomat, the proximity of the Japanese International School to the Chinese University of Hong Kong, a campus that had some of the fiercest clashes and was occupied for days by protesters, prompted the exodus. Repatriation is an increasingly common option for individuals, according to YB Ng, an executive at Asian Tigers Mobility, a removal company that typically shuttles professionals between business centres.

At the same time, foreign executives are having second thoughts about moving to Hong Kong. Vince Natteri, a recruiter of technology executives for the finance service industry at Pinpoint Asia, said business had “worsened signifi cantly” since the university sieges. “What we’re finding is candidates don’t want to come to Hong Kong . . . especially the expats.They are asking if there are roles in Singapore for them,” Mr Natteri said.

The above suggests that OEL with its new campus in Pasir Ris able to take in a maximum international student capacity of 5,000 and currently only running at about half that rate being well positioned to benefit from the opportunities provided by the demonstrations in Hong Kong.

In addition, 
the company’s refinancing of its $120 million bond with an unsecured term loan from OCBC Bank earlier this year will also see them benefiƫting from lower interest expenses, while quarterly revenues for 3Q’2019 has shown stabilization after 20 quarters of consecutive declines.

With an attractive yield of 8.6% and potential return to growth mode in 2020, we maintain BUY on OEL.

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