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CLSA Upgraded Target Price of China New Higher Education from HKD4.5 to HKD7.6 With “Buy” Rating Maintained

(6 October 2017, Hong Kong) China New Higher Education Group Limited (“China New Higher Education”, together with its subsidiaries, “the Group”, stock code: 2001.HK) was upgraded target price by CLSA from HKD4.5 to HKD7.6 with “Buy” rating maintained. As a result of the target multiple for the formal education stocks upgraded from 1.0x to 1.2x PEG by CLSA, to reflect its very positive outlook over the sector and with new revisions to private education regulation becoming effective in September 2017, it was believed that the market interest was returning to this space.

 

Some provinces had drawn up more detailed implementation plans that some suggested a transition/grace period of three to ten years to implement the classification and their respective operational procedures as well as tax rate. CLSA believed that this had alleviated concerns around the sector and confirmed its view that the new framework was meant to be a positive development for the whole private education space.

 

CLSA published a report regarding the interim results of the Group and pointed out that a strong first half results was delivered. With higher student enrolment, new tuition fees at the Yunnan school, operating leverage and lower finance costs after listing, the broker expected this strong growth to continue into the second half of 2017. CLSA believed that the team had solid experience in running a cross-province platform, giving it an edge to ride on M&A opportunities.