Yes, I’m lending to FTMS. This is a calculated risk and not the type of p2p loans that I normally participate in. And no, I’m not paid by MoolahSense or anyone to write this. I’m investing my own savings and I receive no income from any platforms, this blog or whatsoever. I have a few concerns on this loan, but I also like its business franchise and the 14.5% interest. On balance, I think it is a risk worth taking.
First of all, my concerns:
Who is the borrower?
The borrower is FTMS (M), the Malaysia entity. The guarantor is FTMS (S), the Singapore holding company for the group. Repayment to p2p lenders is actually done through FTMS (S), which means that credit risk of FTMS (S) matters too!
Why lend to an overseas project?
Although I’m usually reluctant to lend to any overseas projects, there appears to be a real business case here. For FTMS type of education business, the Singapore market can be quite saturated. Land (for campus) is also expensive. The market opportunity may be larger in Malaysia, where FTMS has moved to a new campus. What about risks to p2p lenders? Yes, there is fx risks. Chasing after repayments in a foreign country can be tricky too. But these risks are mitigated by FTMS (S) being the repayment party and guarantor.
What is the financial condition of the guarantor/group?
The financials of FTMS (M) looks decent. What about that of the FTMS (S) and the group? Unfortunately, these information is not provided. If I have to make an educated guess, I would say that its financial condition should be quite decent, based on the numbers provided at FTMS (M) and the group level.
What I like about this loan:
FTMS has a established track record
FTMS was started in 1986, led by Mr Balbeer Singh Mangat. It has now expanded to a number of countries, including China, Hong Kong, Malaysia and Singapore. It has also partnered with ACCA and other universities. In Singapore, it has the EduTrust and Singapore Quality Class certifications.
Education is a stable business
Unlike other industries, education business – if properly run – should be stable.
Reason to borrow is legitimate
The loan is for marketing and promotion spending for the newly Cyberjaya campus. This sounds right. Cashflow is probably going to be tight whenever a new campus is started, because operating costs (utilities, staff costs) are now higher. But cashflow should improve over time, once enrollment picks up.
Although I have some concerns over this loan (i.e. financial conditions of guarantor, overseas lending), I like that FTMS has an established track record. In education, reputation is everything. Mr Mangat has built the FTMS brand for 30 years. Its financials looks decent. Even if it has difficulty repaying, I highly doubt it will default. I’m betting on the FTMS brand name. In my view, this is a risk worth taking.
Disclaimer: The author is not affiliated with crowdfunding platform companies and borrowing companies. However, he may be an investor in crowdfunding campaigns. Information provided may are obtained from external sources and may contain views by the author. Crowdfunding as investing may not be suitable for everyone. No financial advice or recommendation is provided. Caveat Emptor.