Here's the biggest hurdle to OEL's campus expansion in Pasir Ris

Will it suffer from delays?

According to CIMB, Overseas Education Ltd's biggest re-rating hurdle is capacity expansion.

"Due to resident “activism” in the Pasir Ris area to preserve the woodlands that the new campus will be occupying, there are concerns that OEL‟s plans could be delayed or jeopardised.

But as the Singapore government is pragmatic on land use, we believe the new campus will be built as planned. OEL could also try to circumvent the opposition by incorporating the woodlands in its school design," said CIMB.

Here's more:

OEL listed to raise proceeds for the financing of land and construction of a new campus in Pasir Ris, which will jack up its student capacity by 22% in 2015. It could take on S$72.3m or lessof debt to finance this expansion.

Other than capacity constraints at its current premises, the new campus will sport newer and better facilities.

Once the campus is completed, capex needs will taper off and there could be room for higher dividend payouts, we believe. Excess cash may also be used to pursue growth opportunities in China where land is more available and the provincial authorities, more welcoming.

We do note, however, that any delay in the new campus would change the timeline for the next step-up in OEL‟s earnings.

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