Raffles Edu may invest RM200m in Johor campus

08 March 2010 , By Business Times Singapore

RAFFLES Education Corporation (REC) may pump RM200 million (S$83 million) into a campus in Iskandar Malaysia over five years.

The multi-institutional campus is to be built in phases and completed in about two-and-a-half years.

Given six to nine months to obtain regulatory approvals before REC can register the courses to be offered, 'it will probably take a year or so', REC chief executive Chew Hua Seng told reporters on Wednesday in Langfang City, Hebei, at its unit Oriental University City (OUC).

These comments come a week after REC agreed to collaborate with Iskandar Investment - a wholly owned subsidiary of the Malaysian government's investment holding company Khazanah Nasional - to study the feasibility of setting up a campus in Iskandar Malaysia, Johor, that will enrol 5,000 students in the first five years.

'One reason we want to build a university in Iskandar is to be able to bring students from price-sensitive markets to Iskandar for the time being, while we build our campuses and our reputation,' Mr Chew said.

'I believe a large part of our students will come from Johor and there will be a portion that will come from neighbouring countries for sure.'

At OUC, a 3.31 million square metre self-contained campus that focused on vocational training, the third development phase has begun on 1.5 million sq m of land to develop a science tech park and expand educational services.

OUC chief executive Liu Yan Wen said the company hopes to expand its student population from 36,000 to 100,000 over the next five years.

Combined enrolment at the campus - including two government colleges - is now 50,000.

Although REC has expressed interest in listing OUC by Aug 31, 2013, it aims to do so by 2012 on the Hong Kong main board, when OUC is expected to meet the operating and profit track record requirements for listing.

Preparatory work has already begun, Mr Chew said.

Since REC acquired loss-making OUC in 2008, the latter has been restructured to allow for an offshore listing. Mr Chew said going public will yield capital returns for shareholders and signify OUC's recovery from its chequered past by way of 'public endorsement'.

He told BT that OUC decided against listing on the Chinese mainland because of the government's controls on capital movement, which may weigh on OUC's future cashflow decisions, such as the issue of dividends.

OUC last month welcomed new investor Khazanah Nasional, which acquired a 10 per cent stake for 300 million yuan (S$61.4 million).

Also at the briefing in Hebei on Wednesday, Khazanah chief representative Ben Chan declined to comment on its future decision on this stake upon OUC's IPO. 'All these are questions for the future. And again, any investment review will be made on a standalone basis,' he said.

He also refuted reports in the Malaysian media that suggested Khazanah overpaid for the stake in OUC. Mr Chan said Khazanah had looked beyond the historical performance of OUC.

In the same vein, Mr Chew explained that the FY 2009 net tangible asset (NTA) value of the sale shares at $8.06 million did not reflect the market value and recurring earnings. Adjusted NTA is believed to be 1.2 billion yuan.

'Khazanah will walk in with an investment and walk out being a winner - and we will win altogether. That's our philosophy,' Mr Chew said.