SGD NEW ISSUE REVIEW : G8 EDUCATION LIMITED SGD 3 YR

G8 EDUCATION LIMITED SGD 3 YR
– New G8 Education SGD 3yr announced with strong IOIs post SG roadshow
– Initial price guidance: high 4s

– Comps:
Overseas Education Ltd 5.2 2019 @ 102.50,4.63%
Lend Lease 4.62 2017 @ 104.95, 2.99%

Credit Highlights:

– G8 Education Limited (‘G8’) is an Australasian childcare services provider that is listed on the Australian Stock Exchange (‘ASX’) under the ticker code ‘GEM’, with a market capitalisation of $1.5 billion on 30 April 2014.

– G8 Education is the largest for profit operator in Australia with a portfolio of 298 childcare and education centres, and an additional 97 contracted and not yet settled in Australia.

– G8 currently owns 18 childcare and education centres and operates 48 franchised childcare and education centres in Singapore. In Singapore, G8 operates under the brands Cherie Hearts, Bright Juniors and Our Juniors.

– G8 is exposed to the growing demand for childcare services driven by increased participation of women in the workforce and growing awareness of the importance of early childhood education as a foundation step to better educational outcomes for children. In addition, it benefits from funding of the childcare sector by the Australian government.

– For more information, please refer to attached credit teaser. Investor presentation is also available on the following website: http://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=gem&timeframe=D&period=W

Comments :

Goodwill is the fastest growing asset on their balance sheet, growing 63% last year from AUD 201 mio to AUD 326 mio. This allowed their liabilities and debt to grow proportionately as they acquired 86 childcare centres in 2013 and divested 8.

They currently own 252 child care centres with 234 in Australia and 18 in Singapore.

Their borrowings are mostly pledged on their assets which includes their free cash of 114 mio. 7 out of 8 analysts rated their stock a buy or outperform this year.

Well, aren’t we glad this is G8 and not ABC Learning which filed for bankruptcy back in 2008-2009 and  whose majority shareholder was Temasek. http://news.asiaone.com/News/Education/Story/A1Story20090507-139890.html

And aren’t we lucky that 2014 is the peak birth year globally (except in Japan) and that we will have 139 million new babies hit the streets ?

Riding on this theme, the strong barriers to entry for the education game and a pretty clean set of accounts, would expect this bond see considerable demand, just on its goodwill.