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How Does MindChamps Preschool Ltd Make Money?

MindChamps Preschool Ltd (SGX: CNE) has the pole position in terms of market share for premium range preschools in Singapore. For investors who are looking to invest in MindChamps, it is essential for them to know how the company brings in the revenue. Buying shares in the company without such knowledge is being foolish (with a small “f”).

With that, let’s look at the revenue contribution of each of MindChamps’ business segments for 2017:

Source: MindChamps 2017 annual report

The Education Business segment is where MindChamps houses its company-owned and company-operated (COCO) centres that provide premium child care, education, and learning-related services for preschool children. In 2017, this segment accounted for 62.7% of MindChamps’s total revenue of S$22.8 million.

Under the Franchise & Corporate segment, MindChamps records revenues from the franchising of child care services and enrichment classes, and the provision of administrative support services to its franchisee-owned and franchisee-operated (FOFO) centres.

MindChamps has two main types of franchise agreements. The first is a unit franchise agreement, where a franchisee purchases one-unit franchise licence to operate one FOFO centre. The second is a master franchise agreement, under which a master franchisee purchases the right to on-sell and/or operate an agreed number of units of franchise licences.

At the end of 2017, MindChamps had a total of 59 COCO and FOFO centres.

Last but not the least, the Others segment offers higher education programmes through commercial schools, and business and management consulting services. The segment brought in just S$19,000 in revenue in 2016, and no revenue in 2017.

It’s important to note that 87%, or S$19.8 million, of MindChamps’ total revenue in 2017 is classified as recurring in nature. The company’s recurring revenue consists of school fees, royalty fees, and school event income, among others.

Now that we know the basics of MindChamps’ revenue streams, we can then delve into other aspects of the company, such as its profitability, the strength of its balance sheet, its cash-generating abilities, and so on before deciding whether to invest in its shares.

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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 Sudhan P doesn’t own shares in any companies mentioned.