For FY2026 ended June 30, Raffles Education (SGX:NR7) reported a net loss of $6.1 million, as compared to a net profit of $4.4 million a year ago. Despite the loss, Raffles Education chairman and CEO Chew Hua Seng remains unfazed.

As at June 30, the land’s net book value was RMB616.07 million. The reclamation is expected to record an estimated net loss of RMB337.67 million but to book RMB270.68 million in net proceeds.

Presumably, Raffles Education will use the proceeds to deleverage its balance sheet further. A year ago, total borrowings stood at $208.7 million. It has since fallen to just $86.2 million.

Of the $86.2 million in borrowings, around $40.7 million is held by its Hong Kong-listed subsidiary, Oriental University City (OUC) Holdings. Another $36 million is made up of convertible bonds mainly held by Chew himself, who had stated his intention to convert into shares, thereby raising his stake in the company to up to 55.6% from 43.2% now.

In addition, Chew is in talks to divest non-core assets so the debt load can be halved by the end of this year, or repaid in full. “It all boils down to the valuation that we can fetch from the sale of those non-core assets,” he says.

Chew is also planning to undertake a capital reduction exercise to eliminate accumulated losses of some $170.2 million as of June 30. By doing so, investors can have a “fresh view” of the company, and Raffles Education can resume paying dividends. Chew is aiming for a 50% payout ratio. The company last paid a dividend (excluding a special dividend) in Nov 2015, when its share price was trading around 30 cents.

Slow and steady in Iskandar

Capital management aside, Raffles Education is actively growing its operations, especially those across the region. Doris Chung, the company’s co-founder and director of operations, says the full university licence Raffles University has held in Iskandar since 2011 is significant. Local authorities granted the licence then because they recognise that, for Iskandar’s comprehensive development, access to tertiary education can serve as a growth catalyst. “This university has a lot of potential, from our point of view, ” says Chung, who is Chew’s wife.

However, Chung admits that growing Raffles University will require significant investment. “We have to create more faculty and departments to grow quickly. However, given our previous experience, we would rather not leverage our balance sheet in search of this growth,” Chung shares.

Instead, Chung prefers the steadier path of maintaining a net cash balance sheet to grow Raffles University. “I believe this will be a better strategy for us rather than taking up a significant amount of loans to drive growth. Nonetheless, Raffles University is seeing a bright future at Iskandar and our revenue and student numbers are growing,” Chung claims.

On Iskandar, Chew adds that Raffles Education could potentially divest some of the excess land around Raffles American School. “If you see the surrounding area around Raffles American School, neighbourhoods are being developed and built at a rather fast pace. Therefore, we are in a good position to potentially monetise some of the spare land at Raffles American School in the long run,” Chew says.

Bangkok and Jakarta key priorities for FY2027

For the upcoming financial year (FY2027), Raffles Education plans to invest significant resources in Bangkok and Jakarta. In Bangkok, the company aims to increase K-12 enrollment, as the current facility at Raffles American School (Bangkok) is operating at full capacity. Two new blocks are currently under construction and are targeted to be completed by the end of this year. “This can double capacity to 1,000 K-12 enrollments,” Chew shares.

Meanwhile, Chung explains that the target audience for Raffles American School (Bangkok) is very different from that at Iskandar. “Our Iskandar site primarily targets foreign students like Chinese, Koreans and expats. Whereas our Bangkok facility, located within the Bangna district, the neighbourhood catchment itself is enough to fill up the school’s capacity,” she says.

Chung says the company has a clear game plan for Jakarta too. However, she acknowledged that it will take time for Raffles Education to set up a K-12 establishment in the country.

“Of course, we first need to have identified a nice piece of land before we can commence actual operations. But for now, we are operating Raffles American School (Jakarta) at our existing campus, Raffles Jakarta. We have placed a couple of American teachers there to have a feel for the market and do some soft launching,” Chung says, hoping that by doing so, they can attract attention and awareness within the local high-income earners and expatriates.

China’s challenge

At the same time, OUC Holdings, which holds significant non-core assets on its balance sheet, could be moving to divest those assets. “We will see how it goes for the divestments because right now, China’s property market is weak and a lot of sellers are out there trying to dispose of their properties,” Chew says.

Chew wants to completely dispose of those non-core assets in the next two to three years. “Currently, we are in the discussion stage on the divestment of some of the non-core assets,” he adds, but stops short of providing more details.

Beyond divestment in China, Chew adds that Raffles Education’s focus in China will be mainly on training schools such as Raffles Shanghai and Raffles Guangzhou. “We will be expanding our training schools in China because they are not so tightly controlled in terms of regulations and this is where I am putting my efforts to let these schools be more design-oriented,” Chew says.

Chew believes design-oriented schools will help Raffles Education improve profitability compared with big-format universities. For example, Raffles Tianjin, with enrolment of around 8,700 students, can charge an average fee per student of just $3,000 while fees at Raffles Shanghai and Raffles Guangzhou can reach $30,000 per student. “The number of students at this point does not show you the revenue,” he says.

With such big differences in fees, Chew is leaning toward developing those with higher margins, which can ultimately translate into better profitability for Raffles Education.

“The low-margin ones, even if we have a large number of students, will still be eliminated, as this is our non-core business. Even if our revenue were to decline, we can be assured that we continue to enjoy good margins. Hence, we only do things with very high margins. If not, we don’t,” Chew admits.

Enrolment number still key to Raffles Education

Despite claiming that good margins are important, Chung believes enrolment numbers at Raffles Education are equally important.

“For example, at Raffles American School at Iskandar, right now we have around 500 students and with a total capacity of 2,000 students, every increase in enrolment number will be a direct benefit to my bottom line as the facilities and costs are already accounted for,” Chung claims.

In the longer term, Chung says Raffles Education can realise value from its education facilities across different countries in many ways. “In terms of monetisation, one possible way could be to list the respective education facilities in the respective countries. We could sell a majority stake and perhaps distribute back to our shareholders,” Chung claims.

However, to achieve this, Chung says the fundamentals must come first. “We must first build up our student numbers and must be profitable before considering all these potential corporate actions,” she concludes.

https://www.theedgesingapore.com/news/corporate-moves/raffles-education-aims-be-debt-free-and-resume-dividends-eyes-further