Dubai: Schools in the UAE, Saudi Arabia and other Gulf states continue to generate strong investor attraction, with the GFH Financial Group buying Britus Education. The latter, a K-12 schooling provider, has two educational facilities in the UAE, four in Saudi Arabia and one in Bahrain.
The Britus Education's overall school capacity in these markets adds up to 12,000 students, of which 8,000 are currently enrolled. (In Dubai, Britus owns Sheffield Private School.)
For the Britus deal, Bahrain-headquartered GFH inked the agreement with Saudi Education Fund, which is managed by EFG Hermes.
Britus has a market value of more than $200 million. "This investment is expected to reflect positively on the group’s financials and increase the returns for the group," said GFH Financial in a statement. (The company's stock is trading at Dh1.23 on DFM, down 0.8% at the end of the first hour of trading today.)
Capacity-wise, Britus can serve 12,000 seat counts, with a current operational capacity of 8,000. With the deal, GFH primarily wants to expand in the Saudi market, where Britus has four operational facilities.
There has already been a handful of big-ticket deals in the local K-12 space, the most notable being the one for GEMS by a consortium led by the global investment firm Brookfield. Also, DFM-listed Taaleem signed up with the British school operator Harrow to bring its brand to the UAE.
"There will be lots more entries and exits in the UAE and Gulf education space," said an analyst. "All you need to do is look at the expanding resident base in these markets and see the investment potential."
New schools are being added across the board, with Abu Dhabi's Aldar Education being another prominent name. Aldar Education’s interests include the Cranleigh Abu Dhabi, Al Shohub Private School and Al Ain British Academy among others.
Saudi schools and Tadawul
The Saudi Tadawul accounts for half of the listed educational services companies in the GCC. "Of six companies, four are in the schooling sector," said Junaid Ansari, Director for Investment Strategy & Research at Kamco Invest.
"It is still a niche sector that's seeing significant demand as education is one of the key focus areas for the Saudi government."
Of the six companies on Tadawul, two - Al Muhafaza Education and Horizon Educational Co. - listed this year. The shares of both are up around 40% since the listing. "Shares of the remaining four companies have also seen healthy gains since the start of the year," said Ansari. "The aggregate market cap of companies in school education sector is at SR12.3 billion, or around 1.2% of total market cap for companies in the main market."
More deals for schools?
There is constant talk about more schools in the pipeline and which would draw in a new set of investors in the UAE or Saudi K-12 space. Analysts talk about the GEMS-Brookfield deal as setting a touchstone for what's possible in education sector investments. What this did was convince investors - local, regional and international - that new spaces could be created even in an extremely competitive landscape.
"Investment in the education sector in the UAE remains under-fulfilled - there are plenty of opportunities to monetize in the sector," said an analyst.
"And gain exits via through the capital markets. Education providers in the K-12 sector are gearing up for the IPO pipeline. Investors would do well to capitalize on such high growth sectors."
DFM-listed Taaleem recently came up with upbeat results for the latest financial period, and where it talks about adding more schools to what is an already busy network. While it has not given a schedule for the Harrow schools in the UAE, market watchers say these would create a new barometer for super-premium education in these markets.
"The same formula - of super-premium K-12 schooling - exists in Saudi Arabia and any of the other GCC markets," said an analyst. "You have all these multi-millionaires setting up permanent homes in the UAE and they will need access to schooling facilities for that sort of environment. This is where a Harrow would be a perfect fit."
Taaleem is trading at Dh4, while its 52-week high is at Dh4.21.
Al Mal Capital REIT signs up for K-12
Part of Dubai Investments, Al Mal Capital REIT is another who's been quite active in the education-linked real estate space. It has bought 100% in Carnation Education, which holds the freehold land and buildings of Kent College Dubai. Carnation leased the land and buildings to Kent College for a 25-year period (which commenced in November 2017) with agreed lease rentals. (This can be further renewed for a similar period.)
Kent College's curriculum covers everything from nursery to Year 13.
It's not the only one - Al Mal Capital REIT had bought the real estate assets of Wesgreen International School from Al Batha Real Estate for Dh265 million. The Wesgreen International School has two campuses - Muwaliah (main campus) and Al Qaraien (secondary campus). The school is leased to GEMS Education and is 'one of the premium schools in Sharjah'.
"The deal flow for K-12 assets has been on the rise - the moment investors realised the UAE's resident base was in for significant growth starting 2022-23," said an analyst. "Clearly, everyone's having the same idea - there will be a need for new schools. Whether it's Brookfield, Al Mal Capital REIT or GFH Financial, they are chasing the same prospects."
