SISB: New Campus-High Revenue Surge Theory

SISB Public Company Limited (SET: SISB) recently announced that the company had signed a sales purchase agreement with Supalai Public Company Limited (SET: SPALI) for a plot of land in Rayong Province at the size of 39,200 m2, which is almost the same size of Pracha Uthit Campus, for an establishment of its 6th campus, expecting to launch within 2024 for an educational level from kindergarten to grade 12.

Nevertheless, before the opening of Rayong Campus, the new Secondary Building at Singapore International School Thonburi Campus will hold a grand opening ceremony first early next year, followed by the new Nonthaburi Campus in 2023, reflecting at least one expansion in a year for the next three years.

The secondary building in Thonburi Campus will add 600 of student capacity to the existing 750 students in the primary building. Meanwhile, the opening of Nonthaburi Campus will significantly expand SISB’s capacity by 1,600.

These expansions will be important steps for the company to reach its target of 4,150 students within the next five years.

 

Due to being a company that operates in school business, an increase in the number of students means further growth for its revenues from tuition fees and services income while most of the administrative expenses are related to the fixed cost.

SISB once had a skyrocket increase in net profit for the period ended December 2018, seeing a significant surge from 17.92 million baht in 2017 to 103.52 million baht in 2018, representing a 480% growth in net profit, while the company’s gross margin increased 48.07% from same period of previous year.

According to the Management Discussion and Analysis (MD&A) of SISB for the year ended 2018, the company stated that the increase was mainly due to the opening of Thonburi Campus. Tuition fee income for 12-months period ended 31 December 2017 and 2018 was 695.28 million baht and 875.36 million baht, respectively, representing an increase by 25.90% from the number of students that increased to 2,222 or 12.39%.

SISB noted in the MD&A 2018 that an average tuition fee income per student increased to THB 0.42 million per student in December 2018, growing at 10.40% from the same period of previous year. This partly came from an increase in Extra-Curricular Activity (ECA) revenue.

 

According to Mr. Supakorn Uenhapaibul, Investor Relation of SISB, the opening of the Secondary Building at Thonburi Campus early next year will expand the school’s educational level from nursery-kindergarten, primary & sixth form to grade 12. However, the increase in capacity of the new building does not imply an increase of new students by 600 on the spot. He described that the new capacity will enable primary students to move up to being high school students as new applicants usually do not enter at this level due to unfamiliarity with the curriculum. Simply put, the new building will raise SISB’s revenue ceiling and create an opportunity for the school to offer a complete educational level to children, relaxing the burden for parents to seek new schools after graduating primary school.

Thus, the main focus will be on how well Nonthaburi Campus, scheduled to open in August 2023, can perform in receiving new applicants for the new campus with 1,600 of capacity. The increase in revenue when the company first opened Thonburi Campus in 2018 may have been a solid proof that higher revenue can be achieved when opening a new school.

It would be worth the wait for the opening of Nonthaburi Campus if the revenue could shoot up in the same trend as in 2018.

While it will be more than a year for the wait, finding an entry point to acquire some of SISB’s shares could be a better choice for a long-term investment, seeing that share price has been trading at THB9.00 for a month while schools and other economic activities are returning to normal in Thailand.