ChinaCast Education Corporation Company Interview: Ron Chan Tze Ngon and Michael Santos

• On 12:21 pm EDT, Tuesday September 8, 2009

67 WALL STREET, New York - September 8, 2009 - The Wall Street Transcript has just published its Education Report offering a timely review of the sector to serious investors and industry executives. This 57 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Management Teams -- Secular Trends -- Regulatory Concerns -- Focus on Quality -- Developing Postsecondary Education Programs -- Growth in Postsecondary Education -- Online Education -- International Students -- Student Funding -- Execution Risk -- Management Transition -- Acceleration of Enrollment Rates -- Return on Invested Capital -- Long Term Prospects -- Regulatory Uncertainty -- Valuation Levels -- Stafford Loans -- Earnings Growth -- Opporunity for Growth -- For-Profit Institutions -- Nontraditional Students -- Postsecondary Tuition -- Domestic Players -- Jobs Market -- Decline in Stock Prices -- Fundamental Trends -- Valuation Levels -- Postsecondary Education in China -- Global Education -- Growth Prospects

Companies include: SkillSoft plc (SKIL); Rosetta Stone Inc. (RST); American Public Education Inc. (APEI); Apollo Group Inc. (APOL); Bridgepoint Education Inc. (BPI); Career Education Corp. (CECO); Capella Education Co. (CPLA); DeVry Inc. (DV); ITT Education Services Inc. (ESI); Grand Canyon Education Inc. (LOPE); Strayer Education Inc. (STRA); Blackboard Inc. (BBBB) and Universal Technical Institute Inc. (UTI); Corinthian Colleges (COCO); Lincoln Educational Services (LINC); School Specialty (SCHS); New Oriental Education and Technology Group (EDU); Princeton Review (REVU)

In the following brief excerpt from the 57 page report, Ron Chan Tze Ngon, CEO, and Michael Santos, Chief Marketing Officer of ChinaCast Education Corp., discuss the company and the outlook for the sector and for investors.

TWST: Would give me an overview of the company and talk a bit about its history?

Mr. Santos: ChinaCast Education is a for-profit, postsecondary education company in China that provides both bricks-and-mortar campuses and a nationwide e-learning network in China. I believe we're the first and right now the only education company publicly listed in the United States that owns accredited universities in China. Over the next several years, what we'd like to do is build a nationwide network of campuses and use our e-learning to address the very huge demand for postsecondary education services in China, not only for the basic 18- to 23-year-old demographic, but eventually the 23- to 40-year old working adult education market that's very prevalent in the United States. So essentially what we're trying to do is to build a DeVry or University of Phoenix of China over the next three to five years. Although China recently surpassed the United States two years ago as the largest university population in the world with over 22 million students - where the United States has about 18 million students - only 5% of the population of China has a four-year college degree as opposed to 25% or more in most Western countries. So the penetration rate is still very low. In addition, the Ministry of Education of China, the regulatory and accreditation body, has recently announced that they'd like to increase that to 40 million students over the next 12 years, by 2020. So the Chinese government has the daunting task of trying to build up their university seats so that they can educate a much higher proportion of their population and are now allowing private universities and online degree programs to help address the demand-supply imbalance.The company actually got its start in the dot-com days back in 1999, when the company received a nationwide wireless broadband Internet by satellite license from the PRC government. This was followed by a $17 million Series A VC investment lead by Hughes Network Systems and Intel Capital. We went into commercial service with our broadband satellite services in 2001 and started focusing on providing turnkey distance learning services to state-owned universities. We became profitable with 18 months and then went public on the Singapore Stock Exchange in May 2004, raising about $30 million. We then reverse-merged into an OTC-listed SPAC called Great Wall Acquisition Corp. in December 2006 and then delisted from the Singapore Stock Exchange in early 2007, and moved our listing to the Nasdaq on October 2007. Once we reached the Nasdaq, we embarked on a strategy to transition from a distance education service provider to a for-profit postsecondary education company by acquiring our own accredited degree programs. Thus, we acquired our first bricks-and-mortar accredited university in Chongqing last April 2008 and have recently announced a memorandum of understanding to acquire our second bricks-and-mortar accredited university, which we are targeting to close within 3Q09.

TWST: How does the Chinese for-profit education industry differ from that in the U.S.?

Mr. Santos: The main differences between the U.S. and PRC for-profit education sectors is in terms of the market segment addressed, tuition and revenue model. Chinese for-profit, private universities currently primarily service traditional 18- to 22-year-old undergraduates living on a large campus that usually has about 10,000 students. The tuition is quite low, around $1,500-$2,000 per year, and there is no government loan program. The students and their families pay in cash. Whereas the U.S. for-profit education companies like University of Phoenix, DeVry, and Career Education and others mainly cater to working adults - average age is over 30 years old - and use primarily small campuses in major business districts, and online education to deliver their degree programs. Some U.S. for-profit education companies like Capella and American Public Education are entirely online and don't even have a physical campus. Average annual tuition in the United States is also much higher, like around $10,000-$15,000 per year. But over 60% of their revenue is financed by government loans, such as Title IV funding. Heavy reliance on Title IV funding and other types of education loan programs have created some problems in the U.S. for-profit sector, such as loan defaults and over-aggressive student recruitment practices, which have created high dropout rates and, in some cases, fraud. In China there is currently no Title IV or student loans - it's all in cash. So the China for-profit education business model in China is actually much simpler and at a much earlier stage of development since it doesn't have a large number of online degree program offerings or government backed loans to cater to the adult working population. But although these differences currently exist, we believe that China will evolve quickly and eventually follow the U.S. in having a larger, more sophisticated for-profit education sector.

TWST: How will people be able to afford this?

Mr. Santos: As mentioned, private university tuition in China is currently about $1,500-$2,500 per year, which is moderately affordable for most middle-class families in China's major cities. For example, most middle-class families in these tier-1 and tier-2 cities have a combined monthly income of between $800-$1,000 per month. Then the cost of one year of college for their children is not too burdensome on the family budget. In addition, the one-child policy of China over the past 20 years or so has created a situation where both parents, and in some cases both sets of grandparents, are funding the education expenses of one child.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 57 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

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