A proposed bond debut worth up to P3 billion planned by the STI group, operator of a chain of private schools, obtained a double-A credit rating from local credit watcher Philippine Rating Services Corp.
In a statement, Philratings said it had assigned an issue credit rating of “PRS Aa” for STI Education Services Group Inc.’s proposed bond issue. The offering is targeted by March or April this year.
Obligations rated PRS Aa—the second highest rating in Philratings’ scale—are deemed of “high quality” and “subject to very low credit risk.” The obligor’s capacity to meet its financial commitment on the obligation is deemed “extremely strong.”
Philratings said the rating reflected 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 revenue.
Incorporated in 1983, STI is involved in operating educational institutions which provide senior high school, tertiary, lower tertiary non-degree and post-graduate programs. STI ESG is one of the pioneer schools in the Philippines that allowed students and even working professionals to learn more about information technology or IT.
At present, STI ESG has 32 colleges that are company-owned and 32 that are franchised. Apart from colleges, STI ESG also operates 12 educational centers (ECs), of which five are company-owned and seven are franchised. These colleges and ECs are strategically located in different regions in the country.
“With the implementation of the senior high school program in 2016, STI ESG was able to capitalize on its nationwide presence to be able to adopt and implement the SHS program. To date, all 76 STI schools have been granted permits to offer the SHS program by the Department of Education (DepEd),” Philratings said.
In terms of financial performance, Philratings said STI ESG’s consolidated revenues were on a consistent upward trend. From P1.6 billion in 2012, total revenue rose to P2.4 billion in 2016. The bulk of the revenue was accounted for by tuition and other school fees, accounting for 80.7-87 percent of the total.
Philratings said STI’s net income, on the other hand, was more volatile in movement but was able to register a compounded annual growth rate of 23.4 percent.
“Over the coming years, consolidated revenue will continue to expand on the back of a continued increase in the number of student enrollees. 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,” Philratings said.
STI has filed with the Securities and Exchange Commission a statement for the shelf registration of P5 billion in fixed rate bonds. The first tranche will be worth P3 billion to be issued in seven- and 10-year tenors. —DORIS DUMLAO-ABADILLA