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MindChamps PreSchool Ltd’s IPO: 3 Important Diagrams to Understand the Company’s Competitive Landscape

Shares of MindChamps PreSchool Ltd (SGX: CNE) started trading last Friday.

The company had filed its initial public offering (IPO) prospectus a week prior to its public debut. 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.

As part of the IPO, MindChamps PreSchool commissioned Converging Knowledge Partners to prepare a report on the early childhood education industry in Singapore.

The assessment provided insight on the industry’s competitive landscape for Singapore.

1. Competition comes in many shapes and sizes

The early childhood education scene in Singapore is pretty diverse.

There are five categories in total: public, anchor-operator (AOP), partner-operator (POP), voluntary welfare organisations (VWO) / non-profit organisation (NPO), and private. The research outfit included this description:

“Public preschools include kindergartens helmed by MOE (“MOE Kindergartens”) and the Preschool Learning Academy at Temasek Polytechnic.

Note that AOP and POP are schemes introduced by the Singapore government to provide funding support to selected commercial and VWO operators to enhance the quality (such as developing the capabilities of ECE professionals and their career progression), accessibility (number of kindergarten and child care places), and affordability of early childhood care and education (programme fees are capped).

Preschools under AOP and POP are not considered public preschools.”

Source: MindChamps PreSchool’s IPO prospectus

Within the framework above, MindChamps PreSchool positions itself in the premium range of private preschools. Converging Knowledge Partners defines the premium range as:

“… preschool child care centres that charge each student S$1,700 and above per month for a 5-day week or 5.5-day week full-day programme, in Singapore.”

2. The industry as a whole is growing

Between 2007 and 2016, the number of preschools in Singapore rose from 1,234 in 2007 to 1,812 in 2016 or around 4.4% per year. The graph below provides a summary:

Source: MindChamps PreSchool’s IPO prospectus

Much of the growth comes from child care centres. Notably, the number of centres rose 79.3% between 2007 and 2016 for an annual rise of 6.7%. The research report notes:

“Unlike kindergartens, which typically operate for up to four hours, child care centres provide parents with the added option of full-day, half-day or flexible programmes.

This growth may be reflective of strong demand for child care centre services, or a need for preschools with longer operating hours, across Singapore-resident households.

Rising married females’ participation in the labour force and a corresponding increase in dual-income earner families are the key factors contributing to this demand growth.”

For more on the tailwinds driving the industry, head here.

Converging Knowledge Partners tags the premium preschool addressable market at between $140 million and $150 million.

3. How the key competitors stack up

According to the research report, there are 91 private preschool child-care centres in the premium space. MindChamps PreSchool tops the list with the most number of outlets in Singapore, as shown below:

Source: MindChamps PreSchool’s IPO prospectus

The research report also said that most of the operators employ a franchise model for expansion:

“Six of the eight major premium preschool child care centre chain operators, including MindChamps, have adopted the franchise model to market their brand of preschool education.”

In addition, the three largest operators in Singapore have a presence in three regions:

“Three of these players – MindChamps, Busy Bees and EtonHouse – have made their foray into three regions. MindChamps and Global Eduhub are currently the only two operators and franchisors that have entered into the Australia/New Zealand market. Five major premium chain players – Busy Bees, EtonHouse, Ednovation, Global Eduhub and Julia Gabriel – have established their presence in the East Asia region, with the PRC being the common market of their choice.”

If you would like to learn more about MindChamps PreSchool, click here.

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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.