MindChamps PreSchool Limited’s IPO: 2 Growth Areas Investors Should Know

MindChamps PreSchool Limited filed its initial public offering (IPO) prospectus last Friday.

At the time of the filing, MindChamps PreSchool had a network of 54 centres. 10 centres are owned and operated by the company itself, while another 44 are owned and operated by franchisees. There is much more we can learn about the company as we go through its prospectus.

In my previous article, I shared how MindChamps PreSchool earns its revenue. In here, let’s cast our eyes onto the future and look at how the company can grow its revenue. Here are two possible ways:

1. Higher school fees

As a brief recap, MindChamps organizes its business into two major segments: Education and Franchise. The Education segment covers revenue related to its company-owned-company-operated (COCO) child care centres. The franchise segment houses revenue from its franchisee-owned-franchisee-operated (FOFO) centres.

For the Education segment, MindChamps PreSchool earns revenue through the school fees it charges.

The table below shows the company’s historical number of COCO centres, average number of students, and average school fee per student per month.

Source: MindChamps PreSchool’s IPO prospectus

As you may have noticed, the average school fee per student has increased between the fiscal year ended 31 December 2014 (FY2014) and the first six months of FY2017. The company included this snippet in its prospectus:

“We historically raised our school fees every two years, as well as in specific years to cover the costs of new initiatives, such as when we introduced new organic food products in our preschool centres in 2017.

Going forward, we plan to raise our school fees every year to cover rising operating costs and salary inflation.”

To be sure, it’s not a given that MindChamps will be able to charge more per student in the future as it will have to deal with competition in its market.

2. Global franchising 

At the time of the filing of its IPO prospectus, MindChamps PreSchool had 44 centres in Singapore, six in Australia, two in the Philippines, and one in the United Arab Emirates (UAE). Singapore is the main contributor at the moment.

It is worth noting that MindChamps PreSchool had sold franchise licenses for 109 centres, but only 44 centres are in operation. That would mean more FOFO centres would be opened in the future.

The chart below summarizes the FOFO centres that are yet to be established:

Source: MindChamps PreSchool’s IPO prospectus

From the above, you can see that Singapore, Australia, and China have the most potential FOFO centres in the franchise pipeline. Beyond this, Mindchamps Preschool also noted in its prospectus:

“Apart from Singapore and Australia, we view the China, United States and United Kingdom markets as potential key strategic target markets for our global expansion, from which we may access other target markets such as New Zealand, Malaysia, South Korea and Vietnam.”

If you would like to learn more about MindChamps PreSchool, head here. Stay tuned for more articles on the IPO this week.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.