1、MARCH 19, 2002 Equity Research Media Sylvan Learning Systems, Inc. (SLVN-25.83) Education Services Rating: Attractive 52-Week Range $29-$16 EPS Without Goodwill 2001:$0.67(1) 2002E: $0.94 2003E: $1.09 P/E 2002E: 27.5x 2003E23.7x Dividend Nil Yield Nil Diluted Shares (mil) 46.4 Equity Market Capitali
2、zation (mil) $1,198.5 Book Value per Share $13.4 Est. 5-Yr EPS Growth Rate 15%-20% Jennifer Childe (212) 272-7051 jchilde Sum of the Parts Is Greater than the Whole ? REINITIATED COVERAGE. We reinitiated coverage of Sylvan Learning Systems on March 7, at the previous days closing price of $25.75 and
3、 with a $28 12-month price target. Sylvan provides educational products and services to students of all ages in 25 countries and over the Internet. Fueled by a combination of acquisitions and internal growth, the company has grown its revenue base at a CAGR of 52% over the past eight years. ? THE TR
4、ANSFORMATION IS NEARLY COMPLETE. Having spent the majority of the past 18 months recreating itself and changing its focus to the international post-secondary arena, Sylvans earnings model should now be more consistent, create higher returns, and generate stronger earnings visibility. ? UNTAPPED SYNE
5、RGIES SPELL OPPORTUNITIES. We believe that the company has a vast reservoir of untapped operating synergies between and among its various business lines, which have the potential to add significant value to the overall enterprise. It has the ability to syndicate its content across its multiple distr
6、ibution channels, cross-sell its products and services, and leverage the power of its brand to create recurring sales opportunities. ? APPROACHING AN INFLECTION POINT. Shares of SLVN trade at 28x our 2002 EPS estimate of $0.94. This reflects a discount to its 2001 P/E average of 31x, and a modest di
7、scount to its post-secondary peers. More importantly, the sum of the companys various parts, when valued independently, appear to be worth more than the whole, in our estimation. However, this assumes the company meets its performance targets, which are somewhat aggressive. With more seasoning, we b
8、elieve the multiple could reach 30 x and beyond. Page 2SYLVAN LEARNING SYSTEMS, INC.: SUM OF THE PARTS IS GREATER THAN THE WHOLE SYLVAN LEARNING SYSTEMS, INC. (SLVN-25.83) Company Description: Founded in 1979, Sylvan is a global provider of educational products and services to students of all ages.
9、Through its 3,300 locations in 25 countries, the company provides personalized instruction services to K-12 students through both direct consumer relationships and school-based contracts; and adult instruction through its English language training institutes, accredited post-secondary institutions,
10、online university, and teacher training businesses. The company also has an incubator fund that focuses on bringing emerging technology solutions to the education and training marketplace. Key Upcoming/Recent Events ? February 21, 2002. Fourth-quarter 2001 earnings released. ? January 8, 2002. Manag
11、ement provides 2002 EPS guidance of $0.93-$0.95. ? December 17, 2001. First potential Greenfield development announced an international university in India. ? November 13, 2001. International business school in France acquired. CAPITALIZATION (9/30/01) $ Mil.% Long-Term Debt14619.3 Minority Interest
12、597.8 Equity552 72.9 TOTAL757100.0 KEY FINANCIAL RATIOS Debt/Equity23.9% ROA LTM0.8% ROE LTM4.6% VALUATION 2002E2003E Price/Earnings27.5x23.7x Enterprise Value/EBITDA14.9x10.2xSource: FactSet Research Systems Inc. BENCHMARKSQUARTERLY EARNINGS PER SHARE 2002E2003E20012002E2003E S Bear, Stearns Bear,
13、Stearns Bear, Stearns 2) revenue generated from domestic company-owned centers; and 3) international company-owned centers. Exhibit 8. Sylvan Learning Centers Revenue Breakout, 2001 Company-Owned Learning Centers 54% International 13% Franchise Services 33% Source: Company data; Bear, Stearns Bear,
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