The threat of lower enrolment numbers resulting from the soft labour market and restrictions is expected to hit the bottom line of Overseas Education, according to CGS-CIMB Research.

As such, the brokerage has lowered its FY20-22 earnings per share forecasts by 2.3-20.9% to reflect the impact.

It has downgraded the stock to a “hold” rating from “add” with a lower target price of 26 cents from 42.3 cents previously.

According to CGS-CIMB, Overseas Education’s student enrolment is forecast to decline to 2,400 in the annual year 2020/2021 and 2,300 in annual year 2021/2022.

This comes as retrenchment figures have risen and foreign hiring tightened.

The brokerage notes that Singapore’s unemployment rate spiked to 2.9% in 2Q20 with retrenchments doubling q-o-q to 6,700.

The Ministry of Manpower recently raised the salary threshold requirements for the Employment Pass and S-Pass, which are necessary for foreigners to work here.

“The soft labour market, coupled with recent tightening of foreign work pass policies and border restrictions, is likely to make it tougher for new expats to enter Singapore, and convert earlier enquiries into enrolment at Overseas Education,” CGS-CIMB analysts Ngoh Yi Sin and Caleb Pang Huan Zhong write in a note dated Sept 1.

Overseas Education was last traded at 28 cents with 185,000 shares changed hands on Sept 1.