Resilient Demand in the Chinese Education Space: Companies Able to Achieve Price Increases and Grow Enrollments as the Services Sector in China Continues to Grow

Wall Street Transcript

67 WALL STREET, New York - September 6, 2013 - The Wall Street Transcript has just published its Education Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Gainful Employment Clarification - Enrollment and Retention Trends - Economic Recovery and Enrollment Trends - Growth Drivers in Chinese Education Sector

Companies include: New Oriental Education & Techn (EDU), China Distance Education Holdi (DL), ATA, Inc. (ATAI), ChinaEdu Corporation (CEDU) and many more.

In the following excerpt from the Education Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What are your stock recommendations and top picks right now?

Ms. Ji: We have an "outperform" rating, that's equivalent to the "buy" rating, for EDU, for XRS and for DL. EDU is our top pick in the China education space. For DL, we recommend it for those investors who can invest in small-cap names.

The reason I like EDU is, first of all, the company has just started its so-called harvest mode, and as such, in the past two quarters the company has achieved a very significant year-on-year margin improvement. We expect this margin improvement story will sustain for the next two fiscal years, and on top of that, the company is able to maintain quite solid topline growth, between 18% and 22%.

Let's use the midpoint of 20% topline growth; add a 2% annual margin expansion and your EPS growth is 22%. But in comparison, the company is trading at just 16 times our next year's EPS estimate. So the PEG ratio is below one, and we think the stock at this level still offers quite an attractive risk/reward profile.

DL is our top pick among macro names. It is China's largest online professional testing services provider. The stock has run a lot in the past few months; now it's above $10. If it pulled back on profit taking, we would certainly recommend people buying on any such potential weakness.

DL has achieved very significant top-line growth in the past year, and also it looks like momentum continues for this year. For one of its core tests, the Accounting Professional Qualification Exam, the cash revenue is up over 50% as of last quarter, and we think on a full-year basis they can easily achieve more than 30% growth for this core test. On top of this strong momentum, DL has been issuing a dividend of $0.48 per ADS in the past two years, so the dividend yield is around 4%, and that's still very...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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