CMS International Reiterated BUY on China New Higher Education Group, Target Price revised up to HKD4.9

(Hong Kong, April 21, 2020) China New Higher Education Group Limited (“China New Higher Education”, together with its subsidiaries, the “Group”; stock code: 2001.HK) is pleased to announce that the counterparties and the Group have entered into a settlement agreement regarding the proposed acquisition of Xinjiang School. RMB100mn has already been received by the Group, the remaining shall be paid by the counterparties within 100 days. Therefore, China Merchants Securities International states that the Group maintains the “Clean Slate” story taking hold for FY20/21E, reiterate BUY, target price revised up to HKD4.9.

China Merchants Securities International stated in its report that after the Group received the positive judgement from Xinjiang High Court in favour of the Group’s claims in December 2019, the counterparties approached the Group to enter into a settlement agreement. The counterparties agreed to pay back the Group’s prepayments for the proposed acquisition, amounting to approximately RMB137 million. Of which, RMB100mn has already been received by the Group, with the remaining should be paid by counterparties within 100 days.

China Merchants Securities International believes this announcement wraps up the termination of Xinjiang School acquisition, which has been a drag on the Group's share price since October 2018. This settlement resolution is faster than expected. China Merchants Securities International maintains its stance that the Group to enjoy a “Clean Slate” for 2021, with increasing investor appreciation, and likely to resulting in re-rating up, to a level more in-line with its peers. In light of this positive development and another step closer to their "Clean Slate" view, it upgrades the Group’s TP from HKD4.0 to HKD4.9(+22.5%), potential rising 54.6% comparing with the current share price, re-rating up forward P/E multiple from 10x to 12x.

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About China New Higher Education Group Limited:

China New Higher Education Group Limited is a leading private formal higher education group in China with 20 years of education industry experience, specializing in providing higher education which focuses on applied sciences. The Group endeavors to help each student maximize their potential and live their life to the fullest. Since 2009, the Group has been operating schools in different provinces and regions, and its current school network covers 7 provinces in China, including Yunnan, Guizhou, Hubei, Heilongjiang, Henan, Guangxi, and Gansu.

The Group provides high quality higher education in a wide selection of fields in applied sciences. Its courses are designed to equip students with practical and readily applicable skills, helping to prepare them for the job market. As a leader in high-quality employment, the Group won the title of the Top 50 National Employment of the MOE, with an average employment rate of above 97%. The Group became a constituent stock of the Hang Seng Composite Small Cap Index and the Hang Seng Consumer Goods & Services Index in the Hang Seng Composite Index Series in August 2017, and was included as a constituent stock of the MSCI China Small Cap Index in November 2017 and included as a constituent stock of Shenzhen and Hong Kong Stock Connect in March 2018.