VANCOUVER, British Columbia, May 20, 2014 (GLOBE NEWSWIRE) -- In short order Canada is becoming the third most popular foreign student destination behind the US and UK. Investors should care, why? Mainly because foreign students coming to Canada spent $8 billion in 2010 on tuition alone, excluding housing and collateral spending; more than was spent on unwrought aluminum and the export of helicopters, airplanes and spacecraft to all other countries.
Housing for this group is extremely tight and comes in at about $10,000 per student per year just for housing, if they can find it. Therefore, it is a 'sellers' market when it comes to this space. Add to that the January 15th 2014 announcement by the Canadian Federal Government, which plans to increase the number of foreign students entering Canada from 250,000 to 450,000 in 8 years and compelling revenue growth is virtually assured.
After real estate, education is the largest expense for Asian parents and they have proven that they will spend whatever it takes to give their children—and grandchildren-- the greatest learning advantage possible.
"As virtually the only company dedicated to end user housing and lifestyle solutions for foreign students, CIBT represents an extremely interesting investment opportunity," stated Toby Chu, Vice Chairman, President and CEO of CIBT Education Group (TSX:MBA) (OTCQX:MBAIF) in an exclusive interview with Financial Press. "CIBT plans to finance an ambitious portfolio of real estate by way of public equity financing as well as attract foreign investors to take a sizable position in every new project, bank financing and new immigrant investment money so as to capitalize on the big trend of Chinese money flowing into Vancouver's real estate markets."
Given its proximity to the Asian market, Vancouver and BC are preferred destinations for students from China, Hong Kong, South Korea, Japan, and Latin America. As well, due to political unrest, a large component of Middle Eastern students are also choosing Canada for safety, climate and education opportunities. Due to Canadian Immigration law, all tuition must be prepaid before a letter of acceptance is issued, and housing cost is often combined with tuition fee as upfront payment so the revenues are predictable and secure.
CIBT Education Group Inc. is an education management company focused on the global education market since 1994. CIBT Group owns and operates a network of business, technical and language colleges in North America and Asia. CIBT Group offers cooperative joint programs in 12 countries with campuses, recruitment offices and training centers enrolling over 6,000 students annually. Its education business is operated through Sprott Shaw College (established in 1903) and Acsenda School of Management in Canada, CIBT School of Business and Beihai International College in China, and Global Education Alliance Recruitment Centers in other overseas countries.
CIBT's Real Estate business is conducted through its investment holding company Global Education City Holdings (GEC). For over 20 years the company has been offering all aspects of education and training to domestic students in North America and foreign students including Western and Chinese accredited business and management degrees, programs in college preparation, healthcare, hotel management and tourism, English language training, junior and high school preparation programs for overseas study, and other career/vocational training.
Recently the real estate business has been noteworthy. The plan is quite simple and so far very successful. The Company either builds or retrofits multi-unit accommodations, which are move in ready within 2 years or 9 months respectively. Most are fully leased up and money in hand prior to opening. In turn, the plan is then to sell them to mutual funds or accredited investors at a profit and move on to the next project. CIBT retains a 20-year management contract to manage the property including filling them with students.
"Our success is a double edged sword, albeit a profitable one," states Chu. "Given that Vancouver's student housing market alone is a $1 billion business, we are currently focused here with plans to eventually build businesses that will see our model deployed in other cities in Asia, send North American students overseas and eventually franchise our expertise. Given that students are a known, secure and rapidly growing market in this and other major urban jurisdictions, CIBT is confident of unparalleled growth and building compelling and consistent shareholder value."
CIBT's latest real estate foray was the signing of a purchase agreement with a Vancouver based developer for three properties. This project is to be developed into student centric serviced apartments for domestic and foreign students studying in the Lower Mainland. The site will be capable of handling approximately 350 students during the academic season from September to June, and up to 700 students during the summer camp season from July to August. Total development budget is $44 million when fully constructed and furnished. CIBT reported 7 other properties are either under development, or in negotiation for a master lease or outright purchase.
CIBT's competitive advantages are impressive. Besides having extensive global business and education contacts, management knows how to get maximum return as well as provide culturally relevant and sensitive services to its clientele. Providing everything from locations near subway stations, transportation hubs to concierge lifestyle services and ESL (English as a second language) training, guardian services for younger students, weekend activity packages, it is apparent that there are significant barriers to entry for any would-be competitor.
With a structure that includes constituent divisions dealing with different types of education, housing rentals and real estate ventures, the Company has pretty much locked up this massive and virtually recession proof market.
CIBT trades at $0.33 with a market cap of $21.5 million.
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