Published April 10, 2009

Raffles Education chief mulls taking over Oriental Century

He says he will if the conditions - which include an auditor's report - are right

By JAMIE LEE

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RAFFLES Education Corporation (REC) does not rule out taking over the management of troubled associate Oriental Century, REC chief executive Chew Hua Seng said yesterday.

Mr Chew: 'Management is determined to eliminate all borrowing by the end of FY10'

'If the conditions are right, I will,' he said when asked whether REC would move in.

These conditions include the conclusion of the auditor's report, expected in about a month.

Last month, Oriental Century's former chairman and CEO Wang Yuean admitted having inflated sales and cash figures for years.

The company appointed PricewaterhouseCoopers (PwC) special accountant to investigate.

Mr Chew yesterday defended REC's hands-off approach to Oriental, in which it owns a 29.9 per cent stake.

He said that had he taken a board seat, he may have been able to sideline then-CEO Mr Wang, who has a 25.4 per cent stake.

Mr Chew said that even though he knew Mr Wang for some time, the fraud at Oriental was difficult to spot.

'It's not about corporate governance,' he said. 'It's about the morality of one man.'

To reduce borrowings to zero by fiscal 2010, REC may cut its dividend payout, said Mr Chew. Borrowings totalled $206 million at Dec 31, 2008.

At end-March, REC raised $30.1 million from a private share placement to existing shareholders, which it said it would use to reduce its gearing.

REC said earlier this week that $15 million of the amount has been used to repay bank loans.

'Management is determined to eliminate all borrowing by the end of FY10,' Mr Chew said yesterday.

'We would like to continue to pay a dividend but we do not rule out cutting out a dividend to conserve cash to pay off borrowings until we achieve our objective of zero borrowing.'

Besides new schools in China, Indonesia and India, REC plans to set up two other schools by year-end.

Mr Chew would not say where, but said REC will invest about $1.7 million in fit-out costs and first-year working capital. The investments will be funded by earnings from existing operations, he said.