While many businesses have struggled during COVID-19 and now the Omicron variant, there have been some that have prospered, and even increased their business.
Vancouver-based,
CIBT Education Group Inc. (MBA) (
TSX.MBA,
OTCQX: MBAIF,
Forum) is one of those companies.
CIBT has been in business since 1994 and is one of the largest and most diverse education and student housing investment companies in Canada. Stockhouse Media's Dave Jackson was joined, once again, by company CEO Toby Chu, to get shareholders and investors up-to-date on the latest and greatest from CIBT looking forward into 2022.
TRANSCIPT BELOW:
SH: To start off with, Toby, can you tell us a little bit about yourself and reacquaint our audience with a history of the Company?
TC: Sure. I started the Company 28 years ago. We first started as a private college. Since then, we have grown to 45 worldwide locations with headquarters in Vancouver. We have about 670 full-time staff. We provide education and student housing services to over 11,000 students annually. Our most known education division is Sprott Shaw College. I'm sure some of you may have seen our Metro transit buses painted Sprott Shaw. We also own Sprott Shaw Language College, Vancouver International College, CIBT school of business in Asia and global education Alliance, an education student recruitment division. Our student housing division is Global Education City Holdings, mostly known as GEC. We develop and manage education supercenters, student-centric rental apartments, and one hotel in downtown Vancouver. Currently, we have seven buildings that are fully operational and mostly full. We have eight new buildings under construction, and at the development stage, that's an overall portfolio that we are operating now.
SH: Can you update our investor audience and your CIBT shareholders on any exciting, new company developments?
TC: Sure. We have a few substantial projects that are undergoing development, and the most prominent one is the Education Mega Center in Surrey at the city center of Surrey. We plan on starting construction this year with a development budget of nearly $300 million. We have an estimated exit value of nearly $400 million upon completion. Our Oakridge developments right across the street from the Oakridge shopping mall are slated for construction in 2022. Our budget is $110 million, with an estimated exit value of $160 million. We are also taking possession of another new project we started construction last year called GEC King Edward. This summer, we'll be taking possession and adding about $60 million value to our portfolio and nearly 200 beds. This new site will generate rental revenue for 2023. We also look at some acquisition opportunities with a combined value of about 800 plus million dollars, but the terms are still being discussed.
Our school enrollment is recovering quite well from the border lockdown of the last couple of years. The result was reflected in our Q1 financial reports, with gross revenue increased by 19% compared to the same period of last year. Most students are returning to campus, therefore looking for places to live, and our real estate division is at near full capacity at all locations. These positive trends form the foundation for the Company's major expansion plan over the coming years.
SH: How was the international student market in 2021, and what do you think the outlook for is 2022?
TC: I think it's looking much better than the beginning when people were kind of scared; what is COVID 19, and what will happen after that. During the past two years, education.com and US News both ranked Canada the top 10 most desirable countries for education, mostly because of pandemic control and safety concerns.
Vancouver is ranked one of the safest cities compared to US or UK cities. According to education.com, these factors cause international students and their parents to select Canada as the most desirable country to study. During the border lockdown, our international enrollment was impacted. Still, since Canada reopened its borders in September 2021, we saw a 209% growth in our international education revenue and 145% revenue growth in our rental properties. The rental rate and occupancy rate both surpassed pre-COVID levels. So this is giving us some pretty good telltale signs of what's coming ahead in 2022 and forward.
SH: What is the outlook for Vancouver's real estate and rental market?
TC: According to many reports, Vancouver's real estate market experienced record growth in 2021. It's the highest trading volume and highest in value increases. So these real estate prices drove rental prices up. Unlike any other real estate market boom in the past, the recent rise in real estate value was driven by higher demands and a shortage of supplies, not so much of speculations or foreign buyers as compared to the past. Demand increases for a couple of reasons, such as low-interest rates, cross-country migrations, coming to Vancouver for work and domestic first home buyers, obviously for low-interest rates.
The supply shortage was due to two and a half years of COVID 19 impact with fewer development-permit applications, shortage of staff at various municipalities causing extensive delays in development applications. A new project that we experienced, and from many reports, rezoning, construction to possession can take seven years to complete. A considerable shortage, not enough supply and that's what drove the most recent and probably in the coming years of price increases.
SH: How does this impact CIBT and what are CIBT's strategies for 2022?
TC: Fortunately, we built a steady supply in our pipeline, but overall we saw steady growth, and we expect to continue recovery from the remaining quarter of 2022. Notwithstanding, the Omicron impact will go away soon, I hope. People are beginning to coexist with the virus. Therefore, I think the economy needs to reopen everywhere. Borders need to reopen, businesses return to operations, workers return to the city, and students return to campus. This development will take time, but it will happen, and I think it's happening. Our strategy for 2022 is to be conservative, hunker down, increase liquidity, focus on current projects on hand. As I mentioned earlier, we have quite a few projects on hand that kept us busy and will continue to grow. We have over 1.1 million square feet of new projects under development which translates to over 1.2 billion in our portfolio value upon completion. These are the birds in our hands, and we are not chasing other birds in the bush at this time. We have a healthy pipeline of projects to crystallize our visions and fill our inventory.
SH: CIBT mentioned a potential spin-off of its real estate subsidiary, GEC? Any update on that front?
TC: This subject directly correlates with our earlier discussions. We experienced setbacks due to the pandemic impacts and many unknown factors in fiscal 2020 and 2021. We, therefore, place the process on temporary hold. Now that we have a better grasp of our income and revenue trajectory, the impact is not as severe as initially anticipated. We actively revisit our options while substantial projects are underway and getting completed. First, we have to look back. Our primary objective for spinning off GEC, our real estate division, is to realize a higher valuation. Higher valuation needs fundamental numbers to support it, historical results, pending growth and future outlooks. In the last couple of years, things were a lot of uncertainties, but now I think we better grasp what is in front of us. We need to be prudent on timing and the strength of the business at the time of the spin-off. During the pandemic period, there were many uncertainties compared to today. We are on the right path in the post-pandemic economic conditions. We have regular updates with investment bankers, and we can pull the trigger for such a spin-off with confidence and short notice. We are constantly evaluating the situation.
SH: You've recently announced fiscal year-end financial results for 2021, with net income for the group increasing by a very impressive 209 percent to over $5 million dollars. Sounds impressive!
We are fortunate to be at the right place at the right time. We are optimistic about the overall economy. So even though our result is acceptable, we still have rooms to grow. We look forward to 2022, a more or less post-pandemic era.
SH: What separates CIBT Education Group from the competition and makes your business model unique?
TC: At this time, we are one of the largest privately funded, not publicly funded, student housing providers in Western Canada. We're unique because we also own a substantial private college and serve over 70 other colleges and universities in Metro Vancouver. We understand the education business, and we work closely with our education partners to meet their needs. Compared to all the student housing providers in the world, their expertise came from the real estate sector. We did some research, and we found most of the student housing providers are real estate guys, the smart guys, but they do not have an education sector background. Our expertise covers the education and the real estate sectors with our student pipeline from our schools, and we provide services to other schools in Metro Vancouver. So that makes us unique.
For example, public universities like UBC & Simon Fraser have their student housing, but they are on endowment lands, and they serve only UBC and SFU students only. Rental demands at both universities are in such a shortage. We are a supplier of off-campus housing to many UBC and SFU students today already. We are located at subway stations. Our tenant base came from 70 countries, with 40% across Canada. We're well-diversified to serve the needs of the students of the entire education sector, not one or two schools. Our students came from around the world. So we have a world of audience feeding their students to us. We meet their student housing needs.
SH: Any significant catalysts shareholders should looking forward?
TC: I understand. This is a common question for public companies. People look for a catalyst. In my view, after 29 years, a catalyst to me means a one-time event or a one-time opportunity to spark the next evolution. My approach is to build a basket of exciting and tangible hard assets to grow on a broader base fundamental value without relying on a single event. Every successful project we completed derives significant income and returns. We have many catalysts in our portfolio.
SH: What's the long-term strategy for the Company moving forward, and what should retail and institutional investors be looking out for?
TC: I think we have a unique proposition. We will grow our student housing model to more locations in Metro Vancouver. The demand is still substantial, and supply is still significantly short. We'll grow it in tandem with our education services divisions, more students, more living needs. We'll repeat the model, expand to potentially Eastern Canada and south to the United States. Our model is unique, and our experience is unique compared to any other competition. Our goal is to provide a holistic solution to domestic and international students for their living and education needs, a holistic solution.
For regular updates, please visit
cibt.net.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.