KGI Securities has given an “Outperform” rating on SISB Public Company Limited (SISB) with a target price at ฿11.30/share as the operations are expected to return to normal in 4Q20 and should be equivalent to its 1Q20 earnings result.
SISB reported a good 3Q20 net profit of Bt29mn (-52.4% YoY, +573.9% QoQ). The result was 10.5% above the forecast. The company’s 3Q20 normalized profit was Bt36mn (-38.4% YoY, +27.0% QoQ), which was 8.2% above our estimate. The difference between net profit and normalized profit was Bt7mn extra expense from the dissolution of Singapore International School Ekkamai.
All-in, SISBs performance was in line with KGI’s view that earnings would improve QoQ from the worst quarter in 2Q20 following the re-opening of schools from online learning. For 3Q20, SISB’s sales revenue was Bt262mn (-6.9% YoY, +18.4% QoQ), while gross margin was 38.6% (compared to 42.9% in 3Q19 and 39.5% in 2Q20), due to some discount to students for the period. The company’s 3Q20 and 9M20 net profits accounted for 20% and 64% of KGI’s full-year estimate, respectively.
The school’s performance is expected to return to normal in 4Q20 and should be equivalent to its 1Q20 earnings result. KGI foresaw further growth over the longer term from the land purchase agreement in the northern part of Bangkok, in Pakkred District, Nonthaburi Province with Property Perfect (PF). The purchase of approximately 14.8 rai will be used for a new campus. Ultimately, the new campus will operate from Kindergarten to Grade 12 (K-12) with a capacity of 1,600 seats.
KGI believed that it is likely that SISBs earnings would return to normal in 4Q20, supported by a new tuition fee (new semester) and increased student numbers. Hence, the security company maintained earnings forecasts with estimated net profits of Bt144mn (-34.6% YoY) in 2020F and Bt226mn (+56.6% YoY) in 2021F.