STI COLLEGE scored a double “A” from Philippine Rating Services Corp. (PhilRatings) for the issuance of bonds worth P3 billion.
In a statement released on Monday, the local debt watcher said it assigned a “PRS Aa” rating on the bonds proposed by the subsidiary of listed STI Education Systems Holdings, Inc. under a shelf registration for P5 billion worth of debt securities.
STI College, incorporated as STI Education Services Group, Inc. (STI ESG) in 1983, plans to issue the first tranche of the shelf offering in tenors of seven and 10 years, according to a disclosure to the Philippine Stock Exchange on Jan. 12.”
The company has earmarked the proceeds of the bond offering for the expansion of its campuses and other general corporate purposes.
To date, STI College has 32 schools under its ownership and 32 more under franchise agreements across the country. It also operates 12 educational centers, of which five are company-owned and seven are franchised.
STI College offers senior high school across its schools, taking advantage of the implementation of the K to 12 program that expanded the country’s basic education curriculum to include two years of vocational studies.
PhilRatings found the proposed bonds to have a high quality and very low credit risk. It assigned the second highest score on the debt papers to indicate also the extremely strong capacity of STI College to meet its financial commitment.
The debt watcher assigned a “stable” outlook on the rating given to the proposed bonds. This suggests the debt issue will likely maintain its PRS Aa score within the next 12 months.
“The rating reflects the following factors: STI ESG’s ample cash flows with minimal reliance on debt; the stable demand for its business; its position as an established educational institution with the ability to adapt to shifts in the industry; and its consistently improving revenues,” PhilRatings noted.
STI College has shown a consistent upward trend historically, according to PhilRatings, with its total revenues growing to P2.4 billion last year from P1.6 billion back in 2012. Tuition and other school fees comprised as much as 87% of the revenues.
The company’s net income, meanwhile, registered a compounded annual growth rate of 23.4% despite a more volatile trend. Last year, for instance, the bottom line dropped on the 134% increase in interest expense following the drawdown of a loan from China Banking Corp. in 2015 and the absence of a one-time gain.
In the six months to September 2016, the consolidated revenues of STI College improved 17% year on year to P1.2 billion. Tuition and other school fees continued to account for 83% of the total, while cost and expenses rose at 5%. Accordingly, the company netted 59% higher or P542.7 million.
“Over the coming years, consolidated revenues will continue to expand on the back of a continued increase in the number of student enrollees,” PhilRatings said.
“The Group is focused on organic growth in its schools located nationwide and will continue to pursue this track during the projected period. Bottom line will likewise show an upward trend while net profit margins will be maintained within historical levels.” — Keith Richard D. Mariano
