HumanSoft | Booming Demand in Kuwait's Education Sector | KUW8
HumanSoft Holding Company is engaged, along with its subsidiaries, in establishing
and managing private universities and colleges, providing computer education,
language training, executive courses, and electronic commerce and media, since
1997. Humansoft has acquisition of interests in related business in Kuwait and
abroad. The Company has four major business segments, which are as follows:
and career development programs: Primarily, New
Horizons Computer learning centers that operate out of key locations in the
Middle East viz. in Kuwait, Dubai, Qatar and Abu Dhabi. These centers provide
training courses building up from beginner level to the acquisition of advanced
certificates in the latest Microsoft, CISCO and Citrix technologies.
Professional courses are also on offer such as Six Sigma, Project Management
and Information Security.
- English Training: Operates
through Expression Institute for Private Training, in affiliation with Direct
English Linguaphone Group. It incorporates a learning system, which is based on
a cyclical pedagogical syllabus that focuses on instruction in conversational
English and the comprehension.
- Learning Solutions: TRACKLS
focuses on delivering content-based programs and learning solutions for
enterprises powered by the Internet, thereby empowering corporate clients and
institutions to transform into learning organizations. It provides a wide array
of learning solutions ranging from IT, Business, Desktop, and Language
e-learning content and professional certifications and learning management
- Higher Education: Apart
from AUM & ACM, Tawteen focuses on career development and job placement of
GCC nationals in the private sector. Having conducted several projects in the
UAE and Kuwait, where it has been able to train and place more than 2,500 newly
graduated locals in the private sector, Tawteen now focuses on career
Development and Placement of students at AUM and ACM by working closely with
external organizations and employers.
Why Human Soft | Key Observations
Higher Education is the Need of an Hour
sector carries a strong future demand for tertiary education, due to multiple
factors like government support for higher education, growing youth population
and skills-gap in the corporate sector. As an organization, HumanSoft’s earnings
power, sustainability of cash flows and high operating margins are positive and
remain key pillars.
company’s strategic focus and taking advantage of the absence of other prominent
education service provider in Kuwait (& in the GCC), the stock carries a promising
outlook for investors, going forward.
Booming Demand in Kuwait's Education Sector
government’s commitment to education as both a social good and a prerequisite
for its economic diversification strategy has seen spending on the sector rise
in recent years. Even with government coffers less flush with oil income,
developing Kuwaitis’ knowledge and skills remains a top priority. Youth
population in Kuwait between the age group of 15-19 years is set to grow at a
CAGR of 3.2% over next five years. Moreover, high school graduates account for
only 5.4% of the youth population as per our 2017 estimates, which should improve
going forward. Kuwait continues to provide financial support to Kuwaiti
students who wish to pursue university education. This should drive demand for
private education sector is regulated by the Ministry of Education, which is
currently developing the strategy to reform teaching methods including
improving and upgrading the curriculum. The private school market is highly
competitive and is characterised by the presence of several well-established
players across the country. Additionally, Kuwait has potential to improve in
line with GCC peers in Higher Education and Training, as per the World Economic
Higher Education Spending is Good for HumanSoft
government continued to increase is budget allocation for education, as it
reached 13.06% of total allocation in 2019, from 9.5% of its 2016 budget, but
still below the GCC average of 15.6%. The regional average is influenced by the
huge sums being committed by Saudi Arabia, at 17.5% of its 2019 budget. Qatar
allocated 9.4% and Bahrain spent 8.8% .
education spending has grown rapidly in recent years, as the leadership has
continued to emphasize the importance of education in creating sustainable
employment for Kuwaitis and equipping them with the skills to compete in the
Subsidiaries and Associates
11 subsidiaries and 2 associates, HumanSoft has expanded its wings across the
region. Out of 11 subsidiaries, 5 are in Kuwait where it has a strategic Direct
interest of around 100% in 2 firms and 3 others with an Indirect interest of
99%. The last one subsidiary with 100% stake is based in the UAE. Out of other
6 subsidiaries, 5 are based with an Indirect interest of 100% in the UAE and
the last one is in Qatar .
On associates’ part, 2 associates with a 40% stake lies in Qatar.
company’s strategy is to derive almost all of its income from focusing on “Higher
Education segment” with a CAGR of 9% for coming two years and with a gross
profit margin of 77%+ . Such increment is aided with
further increase in blended fees (KWD/year) over the same period from American
University of the Middle East (AUM) & American College of the Middle East
upcoming auditoriums, exhibition center and amenities should attract a higher
proportion of high school graduates to the AUM & ACM going forward.
- Shortage of skilled teachers
- The enrolment rate in the higher education segment remains low, reflecting a mismatch between skills taught to graduates and requirements of the labour market
- Setting up a school involves not only a high capital requirement, but also high running costs
the sector provides enormous opportunities, yet it does face multiple
challenges too. Currently, the private sector participation is low but rising.
The key concern is the “Quality of Education”, due to which many students
opting to go overseas for higher education instead of enrolling in local
educational institutions. Also, education sector is one of the capital
intensive industries with a long turnaround, which acts as a barrier for many
investors looking for a quick gains. Moreover, while new government policies
are implemented to accelerate the private sector participation and help keep
pace with increasing demand in the region, yet we cannot deny that these might
take time to implement and hence there exists an execution risk.
Find out more about KMEFIC FTSE Kuwait Equity UCITS ETF (KUW8).
As of 10th July 2019, the KMEFIC FTSE Kuwait Equity UCITS ETF (KUW8) held 3.60% of its weight in HumanSoft Holdings.
Read our KUW8 Whitepaper, "Funds & Falcons | Oportunites in an Emerging Kuwait" here.