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Hong Kong stock market new analysis: Mainland private higher education and vocational education group Hua University (01756.HK) _courses

Release Time:2021-09-05 Topic:How do mainland residents buy new shares in Hong Kong stocks Reading:129 Navigation:Stock Liao information > Education > University > Hong Kong stock market new analysis: Mainland private higher education and vocational education group Hua University (01756.HK) _courses phone-reading

During the track record period, the Group’s reputation has grown steadily, revenue and gross profit have grown steadily, which is believed to be related to the high initial employment rate brought about by high-quality education programs. Revenue increased from approximately RMB 578 million for the year ended August 31, 2017 to approximately RMB 608 million for the year ended August 31, 2018, and then increased to approximately RMB 675 million for the year ended August 31, 2019 Yuan. Gross profit increased from approximately RMB 319 million for the year ended August 31, 2017 to approximately RMB 334 million for the year ended August 31, 2018, and then increased to approximately RMB 368 million for the year ended August 31, 2019 Yuan. For the years ended August 31, 2017, 2018 and 2019, the gross profit margin was 55.2%, 55.0% and 54.5%, respectively.

2. Operation status

1. School

The group operates the following three in Guangdong Province Schools all grant degrees or certificates recognized by the government:

• Huali College: a private independent college that provides four to five years of undergraduate courses and awards a bachelor’s degree recognized by the Ministry of Education. It is jointly organized by the Group and Guangdong University of Technology Office;

• Huali Vocational College (including Zengcheng Campus and Yunfu Campus): an educational institution of higher education that provides three-year vocational courses and grants a college diploma recognized by the Ministry of Education;

• Huali Technician College (including Zengcheng Campus and Yunfu Campus): Private technical school, mainly providing three-year full-time vocational courses, grants the Huali Technician College Technician Diploma recognized by the Guangdong Provincial Department of Human Resources and Social Security, and also provides short-term intensive careers course.

As of the latest practicable date, some basic information of the school is as follows:

2. Students

As of October 31, 2019, there are a total of 40,627 students in the three schools, including 17,794 Huali College students, 14,175 Huali Vocational College students, and 8,658 Huali Technician college student.

(Chinese University Prospectus-the number of students enrolled in each school and tuition income)

From In terms of the number of students and tuition income of each school, the number of students enrolled in Huali College in the 2016/2017 academic year, 2017/2018 academic year, 2018/2019 academic year, and 2019/2020 academic year were 14092, 13,003, 15,126, 17,794 people, the subtotals of the number of students enrolled in Huali Vocational College are 12822, 13,341, 13044, and 14,175 respectively. The subtotals of the number of students enrolled in Huali Technician College are about 11874, 10342, 9050, 8658, respectively. people. In each period, the number of students enrolled was approximately 38,788, 36,686, 37,220, and 40,627.

For the three years ended August 31, 2017, 2018, and 2019, Huali College’s tuition income was approximately RMB 245 million, 249 million and 323 million, respectively. The tuition subtotals of the college are about 179 million yuan, 203 million yuan, and 203 million yuan, respectively. The tuition subtotals of Huali Technician College are about 114 million yuan, 114 million yuan, and 103 million yuan respectively. In each period, the total tuition fees were approximately RMB 549 million, RMB 566 million, and RMB 630 million, respectively.

3. Teachers

The quality of education provided by the group is closely related to the quality of teachers. Possess the necessary industry expertise and practical experienceThe teaching ability and dedication of experienced teachers help students form learning habits. The group recruits teachers based on the size of current students and the number of new students at the beginning of each school year. As of August 31, 2017, 2018 and 2019, there were 1,473, 1,452 and 1,650 teachers (full-time and part-time) respectively.

3. Customers and suppliers

Customers mainly include students and parents. For the years ended August 31, 2017, 2018 and 2019, no single customer accounted for more than 5% of revenue. The suppliers mainly include Guangdong University of Technology, construction and decoration companies, landscape companies, book suppliers, furniture suppliers and teaching and office equipment suppliers. For the years ended August 31, 2017, 2018, and 2019, the purchase amount from the largest supplier was approximately RMB 68 million, RMB 236 million, and RMB 307 million, respectively, accounting for 31.7% of the total purchases during the relevant period. 42.2% and 33.7%. For the years ended August 31, 2017, 2018 and 2019, the purchases from the five major suppliers were approximately RMB 124 million, 419 million and 705 million, respectively, accounting for 57.8% and 74.8 of the total purchases during the relevant period. % And 77.4%. From the trading record period to the Latest Practicable Date, with the exception of Guangzhou Gaobiao Construction Engineering Co., Ltd., none of the directors and their respective close associates owns more than 5% of the issued share capital and has any interest in the five major suppliers.

4. Industry scale and competitive landscape

1. Industry scale

(1) China And South China’s private higher education industry

According to the Frost & Sullivan report, the total revenue of China’s private higher education industry increased from RMB 82.9 billion in 2014 to RMB 118 billion in 2018, a compound annual The growth rate is 9.2% and is expected to increase to RMB 163.7 billion in 2023, representing a compound annual growth rate of 6.8%. With the increase in the number of higher education students, the total number of private higher education students has also increased steadily. According to the Frost & Sullivan Report, the total number of students in private higher education institutions in China increased from approximately 5.9 million in 2014 to 6.5 million in 2018, with a compound annual growth rate of 2.6%. It is expected to further increase in 2023. To 6.7 million people, a compound annual growth rate of 0.5%.

With the growth of per capita GDP during the same period, the average tuition for higher education per student per academic year has increased from RMB 7,557 in 2014 to RMB 8,005 in 2018. As China's economy continues to develop and per capita GDP continues to grow, it is expected that the average tuition level of higher education in China will continue to rise. In 2018, the average tuition level of private higher education institutions was approximately RMB 13,530, much higher than the RMB 7,052 of public higher education institutions.

South China includes the three provinces of Guangdong, Guangxi and Hainan. The economy of Guangdong Province is more developed than that of Guangxi and Hainan, accounting for 10.8% of China's GDP. As of the end of 2018, Guangdong had 54 private higher education institutions (including Sino-foreign joint venture schools), and the number of private higher education institutions ranked first in China. The number of students in private higher education institutions in Guangdong reached 666,000, accounting for 10.3% of the total number of students in private higher education institutions in China. Compared with Guangdong, Guangxi and Hainan have relatively backward economies and limited higher education resources, so there is more room for the development of private higher education institutions. As of the end of 2018, there were only 25 and 9 private higher education institutions in Guangxi and Hainan, respectively, with approximately 198,200 and 70,600 students enrolled, accounting for 3.1% and 1.1% of the total number of private higher education institutions in China.

The total revenue of the private higher education industry in South China increased rapidly from RMB 11.3 billion in 2014 to RMB 16.1 billion in 2018, with a compound annual growth rate of 9.3%. In 2018, the total revenue of the private higher education industry in South China accounted for 13.7% of the total revenue of the private education industry in China. It is expected that the total revenue of private higher education in South China will further increase from RMB 16.1 billion in 2018 to RMB 22.7 billion in 2023. The compound annual growth rate is 7.1%. From 2014 to 2018, the number of private higher education students in South China increased from 805,100 to 934,900, a compound annual growth rate of approximately 3.8%. It is estimated that the number of private higher education students in South China will increase from 934,900 in 2018 to 979,000 in 2023, a compound annual growth rate of approximately 0.9%.

According to the number of students in school, the market share of private higher education in South China in 2018 was 30.2%, higher than the national average of 20.9%, indicating that more students tend to choose private institutions to pursue higher education. Based on the number of students in school, the market share of private higher education in South China is expected to remain at 29.9% in 2023.

(2) Private vocational education industry in China and South China

The total revenue generated by the private vocational education industry in China increased from RMB 24.9 billion in 2014 to RMB 39.6 billion in 2018 It is expected to further increase to RMB 68.8 billion in 2023. The total enrollment of private vocational education institutions in China increased from 4.3 million in 2014 to 4.8 million in 2018, and is expected to further increase to 5.2 million in 2023.

The total revenue of the private vocational education industry in South China increased from RMB 3.9 billion in 2014 to RMB 6 billion in 2018, with a compound annual growth rate of 11.9%. From 2018 to 2023, total revenue is expected to increase at a compound annual growth rate of 9.8% to RMB 9.6 billion in 2023. From 2014 to 2018, the number of students enrolled in private vocational education in South China increased from 721,800 to 799,200, a compound annual growth rate of approximately 2.6%. It is expected that the number of students enrolled in the private vocational education industry in South China will remain stable, from 799,200 in 2018 to 854,500 in 2023, with a compound annual growth rate of approximately 1.3%.

2. Competitive landscape

China's private higher education industry is highly fragmented across the country. Since operators of higher education institutions focus on specific locations rather than cross-regional or cross-provincial operations, participants do not have a large market share. Compared with 727 in 2014, there were 749 private higher education institutions (including 265 independent colleges) in 2018.

The private higher education market in South China is also quite fragmented. As of the end of 2018, the five largest players in the private higher education market in South China accounted for approximately 16.4% of the market. As of the end of 2018, Hua University provides private higher education services in schools (including Huali College and Huali Vocational College) with a total of approximately 28,200 students. Based on the number of students enrolled, the group ranks fourth among all private higher education service providers in South China , Accounting for about 3.0% of the market share of private higher education in South China.

The private vocational education market in South China is relatively fragmented. As of the end of 2018, the five largest players in the South China private vocational education market accounted for only about 13.0% of the market. In terms of enrollment, the Group has a leading position in the South China private vocational education market where its business operations are located. As of the end of 2018, Hua University provides private vocational education services in schools (including Huali Vocational College and Huali Technician College) with a total of approximately 22,200 students. Based on the number of students enrolled, the group ranks first among all private vocational education service providers in South China Second, it accounts for about 2.8% of the market share of private vocational education in South China.

5. Financial data analysis

(Hua University Prospectus -Comprehensive income statement)

For the three years ended August 31, 2017, 2018, and 2019, the group achieved revenues of approximately RMB 578 million, RMB 608 million, and RMB 675 million, respectively, representing a year-on-year increase The speed is about 5.2%, 11.0%.

The cost of sales was approximately RMB 259 million, RMB 274 million, and RMB 307 million, respectively, accounting for approximately 44.8%, 45.0%, and 45.5% of the total revenue, showing a gradual upward trend.

Gross profit was approximately RMB 319 million, RMB 334 million, and RMB 368 million, respectively, and the corresponding gross profit margin was approximately 55.2%, 55.0%, and 54.5%, which dropped slightly year by year.

Net profits were approximately RMB 193 million, RMB 193 million, and RMB 223 million, respectively, and the corresponding net interest rates were approximately 33.4%, 31.8%, and 33.1%, with slight fluctuations. The annual profit for 2017 was approximately RMB 193 million, while that for 2018 was approximately RMB 193 million, which remained stable. The annual profit increased from approximately 193 million yuan in 2018 to approximately 223 million yuan in 2019, in line with business growth.

(Hua University Prospectus-Net Profit and Adjusted Net Profit)

Each period , The adjusted net profit was approximately RMB 201 million and 2.13 respectively100 million yuan, 253 million yuan, the corresponding adjusted net interest rate is about 34.8%, 35.1%, and 37.5%, rising year by year.

(Hua University Prospectus-income from tuition and boarding fees during the period shown)

In the three years 2017-2019, the total tuition fees collected by the group were approximately RMB 549 million, RMB 566 million, and RMB 630 million, which accounted for approximately 93.1%, 93.0%, and 93.3% of the total revenue; the total boarding fees were approximately RMB RMB 39.663 million, RMB 42.270 million, and RMB 45.079 million, correspondingly accounted for approximately 6.9%, 7.0%, and 6.7% of total revenue.

(Hua University Prospectus-Gross Profit and Gross Margin of Each School)

Huali Careers The college’s gross profit margin decreased from 61.3% for the year ended August 31, 2017 to 57.8% for the year ended August 31, 2018, mainly due to the increase in the number of faculty members. The gross profit margin of Huali Vocational College was further reduced to 48.6% for the year ended August 31, 2019, mainly due to the increase in the number of faculty and salary levels and the increase in depreciation and amortization mainly due to the increase in property, plant and equipment. The gross profit margin of Huali Technician College decreased from 75.5% for the year ended August 31, 2017 to 73.3% for the year ended August 31, 2018, mainly due to the increase in the number of faculty and staff, the completion of construction projects and the investment in new teaching buildings The use leads to an increase in property, plant and equipment, which leads to an increase in depreciation and amortization. The gross profit margin of Huali Technician College was further reduced to 69.4% for the year ended August 31, 2019, mainly due to the increase in amortization caused by the purchase of land use rights for the establishment of a new technical school in Jiangmen City, Guangdong Province, and the increase in amortization due to Huali Invested in the transfer of the student dormitory building to the school in September 2018. Since then, Huali Technician College has assumed the cost of public services related to the dormitory building, resulting in an increase in the cost of public services.

(Hua University Prospectus-Allowed Capacity of Each School)

2016/2017 For the academic year, 2017/2018 academic year, and 2018/2019 academic year, the allowable capacity of Huali College is 3940, 4655, and 5214 respectively, and the allowable capacity of Huali Vocational College is 5700, 5943, and 6866 respectively. .

(Chinese University Prospectus-the number of students enrolled in each school and the average tuition)

2016 /2017, 2017/2018, 2018/2019 school years, the number of students enrolled in Huali College is approximately 14092, 13,003, and 15,126 respectively. The average tuition fee per student is approximately RMB 17,378, 19,148, and 21,376; Huali The total number of students enrolled in the vocational college is 12822, 13,341, and 13044, and the average tuition fee for each student is approximately RMB 13,971, 15,195, and 15,576; the total number of students enrolled in Huali Technician College is approximately 11,874 and 10,342 respectively. , 9050 people, the average tuition per student is about 9640 yuan, 11027 yuan, 11406 yuan. The total number of all students is about 38,788, 36,666, and 37,220. The average tuition fee per student is about RMB 13,883, RMB 15,421, and RMB 16,919.

(Hua University Prospectus-the total number of people and utilization rate of the school’s Zengcheng campus)

The group provides dormitories for students on the Zengcheng campus. Generally, students are required to stay in the school dormitory in Zengcheng during their studies (except for the internship in the final school year). Therefore, the capacity of each Zengcheng campus of the school is limited by the available beds in the dormitory of Zengcheng School. Judging from the total capacity and utilization rate of the school’s Zengcheng campus in each period, the capacity is 25,970, 27,896, and 28,082, and the utilization rate is approximately 95.0%, 91.1%, and 91.7%.

(Hua University Prospectus-Planning Capacity of Yunfu Campus)

Group in Yunfu The campus does not have any school dormitories. Students are usually required to stay in the dormitory provided by Hualiyuan Technology (a related person of the company) near the Yunfu campus during their studies (except for internships in the final school year). On August 28, 2019, with Huali GardenTechnology entered into a property lease framework agreement, and Hualiyuan Technology Association leased certain apartments to the group as school dormitories. The planned capacity and the planned capacity utilization rate provide more useful information about understanding the utilization status of the Yunfu campus.

The planned capacity of Huali Vocational College Yunfu Campus in the 2018/2019 academic year is 3000 people, and the planned capacity utilization rate is about 21.3%; within three academic years, the planning of Huali Technician College Yunfu Campus The capacity is 5,000, 5,000, and 5,000, and the utilization rate of the planned capacity is about 34.5%, 16.8%, and 11.2%, respectively, which continues to decline.

(Hua University Prospectus-Balance Sheet)

In 2017, 2018 and The net current liabilities as of August 31, 2019 were approximately RMB 428 million, RMB 252 million and RMB 956 million, respectively. Net current liabilities were recorded on each of the above dates, mainly due to a large amount of contractual liabilities, mainly including tuition fees and boarding fees received in advance of students on a pro rata basis during the relevant course period; significant amounts due to related parties were recorded. Mainly include the amount due to related parties related to the construction of the school; a large number of accrued expenses and other payables were recorded, mainly including the payables for the purchase of property, plant and equipment, the management fee payables of Guangdong University of Technology, the miscellaneous fees received from students, and property Management service payables and government subsidies payable to students; and there are a large number of outstanding bank loans, which are mainly generated to support business expansion and allocate working capital.

In addition, the net current liabilities as of August 31, 2019 were also due to: the increase in current liabilities transferred from non-current liabilities to payments due to Hualiyuan Technology; and the decrease in cash and cash equivalents , And the main reason lies in the purchase of property, plant and equipment and intangible assets for the expansion of Huali College and Huali Vocational College, and the purchase of land use rights and property, plant and equipment for the establishment of a new technical school in Jiangmen City, Guangdong Province Payment. Current liabilities as of August 31, 2017, 2018 and 2019 include contract liabilities of 484 million yuan, 556 million yuan and 666 million yuan, respectively. Contract liabilities do not cause cash outflows, but are included in the income for the next 12 months.

During the trading record period, part of the cash from contract liabilities was used to support daily operations and to allocate funds for the construction of school buildings and facilities. Excluding the contract liabilities, net current liabilities (equal to total current assets minus total current liabilities (after deducting contract liabilities)) were recorded at approximately RMB 290 million on August 31, 2019. On the 31st, net current assets (equal to total current assets minus total current liabilities (after deducting contract liabilities)) were recorded at RMB 56.3 million and RMB 304 million, respectively.

After listing, net current liabilities may be recorded. It is expected to receive the funds generated from business operations and the net proceeds from the global offering to further improve the net current liabilities.

(Hua University prospectus-net assets as shown on the date)

During the trading record period, the net The assets were approximately RMB 865 million, RMB 1.358 billion, and RMB 1.581 million, respectively. The fluctuations were mainly due to: the impact of the relevant annual profit; in April 2017, the deemed distribution of RMB 666 million to company owners was recorded. During the trading record period, the planned Yunfu campus of Huali Vocational College (formerly owned by Huali Park Technology) was an integral part of the business and was used and operated by the group. Therefore, the planned Huali Vocational College Yunfu Campus is included in the consolidated financial statements as if it had been consolidated since the earliest presentation period.

On April 30, 2017, it entered into an agreement with Hualiyuan Technology to acquire the entire equity interest in the planned Huali Vocational College Yunfu Campus from Hualiyuan Technology for a consideration of approximately RMB733 million. The acquisition and the repayment of the acquisition are related party transactions. However, the Yunfu campus of Huali Vocational College under planning has been put into use and accounted for since the earliest presentation period. Therefore, the subsequent asset acquisitions were actually deemed distributions to the owners (discounted amount was approximately RMB 665 million), and in August 2018, the company’s owners recorded capital injections of approximately RMB 300 million.

(Hua University Prospectus-Cash Flow Statement)

Changes in working capital in each period The former operating cash flow was approximately RMB 341 million, 357 million, and 371 million, respectively, and the net cash from operating activities wereApproximately 217 million yuan, 335 million yuan, and 445 million yuan. At the end of the year, cash/cash equivalents were about 648 million yuan, 624 million yuan, and 454 million yuan, respectively. The cash flow is in good condition and the funds are abundant.

The net cash generated from operating activities for the year ended August 31, 2017 was lower than that for the years ended August 31, 2018, mainly due to the 2017/2018 academic year of Huali Vocational College The school started late, and some tuition fees were collected in September 2017, which reduced the cash inflow of tuition fees collected during the year ended August 31, 2017. The low net cash generated from operating activities for the year ended August 31, 2017 was also due to the repayment of part of the overdue management fees before and after the supplementary agreement with Guangdong University of Technology.

It is expected to obtain funds generated from business operations, bank borrowings, net proceeds from the global offering and other funds obtained from the capital market from time to time after listing to improve cash flow conditions. In addition, in December 2017, Hualiyuan Technology agreed and promised not to demand repayment of the arrears before April 30, 2020. The Group has sufficient financial resources to repay Hualiyuan Technology as required.

(Hua University Prospectus-Main Financial Ratios)

As of 2017, 2018, For the three years ended August 31, 2019, the return on assets (ROE) was approximately 5.8%, 5.5%, and 5.6%, and the return on equity (ROA) was approximately 17.6%, 17.4%, and 15.2%, respectively, indicating profitability. Ability is not stable, and growth is not enough.

The current ratios were approximately 0.6 times, 0.7 times, and 0.3 times, respectively, and fell by more than half in 2019, indicating that short-term liquidity and solvency have deteriorated; debt-to-asset ratios are approximately 74.4%, 62.5%, and 63.5, respectively %, the debt-to-equity ratio is about 129.7%, 61.3%, and 80.4%, respectively, and the debt ratio is about 204.7%, 107.2%, and 109.1%, all of which fluctuate, and the leverage ratio is at a high level, showing great debt repayment pressure .

Compared with August 31, 2018 and 2019, the debt-to-equity ratio and debt ratio as of August 31, 2017 were higher, mainly due to the The acquisition of 95% equity of the planned Huali Vocational College Yunfu Campus and the consideration payable to Hualiyuan Technology resulted in a large amount of payment due to related parties, and the acquisition of 95% equity of the planned Huali Vocational College Yunfu Campus. The consideration payable was recorded as the group The deemed distribution to the controlling shareholder resulted in a decrease in the total equity on August 31, 2017.

VI. Investment value analysis

1. Industry prospects

Stable growth in the past few years. Although the number of higher education enrollment has increased in recent years, the university enrollment rate is still low, the market has huge growth potential, and the prospects are still promising. At the same time, the proportion of new graduates of higher education in the overall unemployed has increased, and more recent graduates are facing employment difficulties, reflecting the increasing demand for graduates with professional skills in the market, and most public universities focus on academic research rather than practice Skills Training. Therefore, it is expected that the number of universities focusing on applied technology will continue to increase.

However, although education-related policies and potential market space are beneficial to the development prospects of the industry, the impact of national policies on private education may be temporary. We still need to pay attention to policies such as weakening the profitability of private education Possibility of introduction.

2. Market competitiveness

Huali Group was established in 2000, initially operating as Huali Technical School in Guangdong Province, and then established in 2001 Huali College, as a secondary college affiliated to Guangdong University of Technology (the predecessor of Huali Vocational College), has grown with the aid of the economic boom in East China and the continuous improvement of higher education in recent years. The company currently owns three higher education institutions: Huali College, Huali Vocational College and Huali Technician College.

In the trillions of China’s education market, asset securitization is beginning to flourish. In each segment, there may be several companies with enough revenue and profit to go public. This is also the development of the education industry. A demand for process and competition. At present, the Group ranks second among all private vocational education service providers in South China, and fourth among all private higher education service providers in South China. It has a large scale and strong strength, and has a regional competitive advantage.

The difference between Hua University and most of the current higher education companies in Hong Kong is that Huali College under the collective can provide undergraduate courses and award bachelor's degrees. Therefore, if it is successfully listed, Hua University will become a scarce private undergraduate concept stock in the education sector of the Hong Kong stock market. After the successful listing, in the highly competitive and promising education market, the group is expected to continue to improve the school-running environment, expand its market share, and enhance its competitiveness.

However, according to the current form of the draft of the Ministry of Justice, it may not be possible to register Huali College as a for-profit private school or complete related procedures or obtain government registration. There are policy uncertainties. All schools under the group are located in Guangdong Province and are also facing the risk of concentration of operations.

3. Profitability

Since the 2017 academic year, Hua University has been operating steadily, with steady growth in revenue, gross profit, and net profit, and gross Interest rate and net interest rate indicators are very attractive, profitability is strong, cash flow is relatively abundant, the volume and performance of private vocational education service providers in my country are good, there will still be good development prospects in the future, and growth is expected .

The company's profit model is no different from other education companies. The main source of income is the tuition and boarding fees of its three universities. The income is mainly related to the number of enrollment and tuition. The undergraduate degree certificate of Huali College has attracted many students to study, and the increasing tuition fees of the college have become the source of continuous growth in the company's revenue. As a private education company with great development potential, the company has demonstrated its strength as a "cash cow". The company has outstanding performance in terms of cash and equivalents and net cash from operating activities. Cash is relatively sufficient, and to a certain extent also guarantees the company's debt repayment.

However, behind the good performance, Hua University has some problems that are different from other private education enterprises, and the future is not worry-free. First of all, the company has insufficient standards for teachers and schools, and the teacher-student ratio has not reached the Ministry of Education's school-running indicators. It is necessary to pay attention to compliance risks in the operation process. Compared with the above, the requirements are gradually met, but the per capita teaching and administrative space for teachers and students is not yet qualified. If full compliance is not achieved within 3 years, there is still the potential risk of restricted enrollment; second, although the number of students is expanded The increase in school tuition is a "card" for its profitability. Income has a steady increase, but the main driving force of performance growth-the source of students, has shown a trend of first increase and then decrease, and the overall growth of the source of students is like a roller coaster. It seems that the ups and downs, and the instability of the source of education, to a certain extent also reflects that the stability of the company’s operating income needs to be studied, but the gross profit margin has been declining year by year. The reason is that although the number of students in Huali Vocational College and Huali Technician College has declined in recent years, the number of students in Huali College has risen sharply; fourth, from the balance sheet, current liabilities fluctuate greatly, and assets The debt ratio is relatively high, but fortunately, there is no shortage of money.

In the future, if Holley wants to improve the teaching and administrative building area occupied by students, as well as the teacher-student ratio, it will need to increase the cost of maintaining, upgrading school facilities, building new buildings and hiring teachers, which may cause profitability growth in the future Certain pressure. Generally speaking, these are only temporary difficulties, and the future development is still correct. If the performance can continue to maintain a healthy growth, there will be a certain medium and long-term investment value.

4. Cornerstone investors

The company has introduced three basic investors, namely the National Investment Promotion M&A Fund and the Human Resources Stock Service Provider. "Worry-free" and Zhou Da, chairman of Shenzhen Kunlun Holdings, subscribed for a total of at least 134 million shares and a maximum of 438 million shares. Calculated at the median price, accounting for approximately 46.1% of the offer shares, with a six-month lock-up period.

Assuming that each offer share is HK$3.095 (the middle price of the offer price range), the cornerstone investor will subscribe for a total of 138 million shares, which is approximately 11.53% of the issued shares immediately after the completion of the global offering. . Among them, the National Investment Promotion M&A Fund plans to subscribe for HK$185 million, JOBS.US plans to subscribe for HK$223 million and the chairman of Shenzhen Kunlun Holdings Co., Ltd. Zhou Da plans to subscribe for HK$20 million.

5. Equity structure

Immediately after the completion of the capitalization issuance and the global offering, Huali Education will own 75% of the company’s issued share capital. Huali Education is wholly-owned by Trust Co under the HL-Diamond Trust, which is owned by Mr. Zhang (appointedThe sole discretionary beneficiary of the discretionary trust established by the trustee is Mr. Zhang Zhifeng, the chairman, executive director and chairman of the nomination committee.

Both Mr. Zhang Zhifeng and Trust Co are deemed to own 75% of the issued share capital of the company directly held by Huali Education, and Mr. Zhang Zhifeng, Trust Co and Huali Education are all deemed to be controlling shareholders. In addition, the public holds 25% of the shares. High equity concentration means that consistent actions in the future are relatively certain.

6. Issuance valuation

According to the total share capital of 1.2 billion shares after listing and the offer price of HK$2.93~HK$3.26, the total market value of the listing can be obtained About 3.516 billion Hong Kong dollars to 3.912 billion Hong Kong dollars, in the current Hong Kong main board market of 2088 stocks in the upper reaches of the level, the size is not small.

According to the adjusted net profit of about 253 million yuan in the 2018/2019 fiscal year, and based on the latest exchange rate of renminbi to Hong Kong dollar 1:1.1161, which is equivalent to 283 million Hong Kong dollars, the static price-earnings ratio (PE) is calculated Approximately 12.42 times to 13.82 times. Considering that the company's income has increased by more than 10% in recent years, the valuation is relatively reasonable.

With reference to education stocks in the same industry listed in Hong Kong stocks, Minsheng Education (01569.HK) has a static PE of 14.84 times, China Kepei (01890.HK) is 19.37 times, and New Higher Education Group (02001.HK) is 15.24 times, China Xinhua Education (02779.HK) was 15.34 times. In comparison with the industry, the growth rate of Hua University Group is slower than the industry average, so its low valuation can only be regarded as fair pricing.

7. The sponsor’s past performance

Most of the recently listed education stocks are the business of China Securities Construction Investment, and the past performance is generally acceptable. These include: Ginkgo Education (01851.HK), which went flat on the first day; Bojun Education (01758.HK), which rose 19.5% on the first day; 21st Century Education (01598.HK), which rose 19.5% on the first day.

8. Risk Warning

First, the profitability of Hua University depends on its ability to maintain or increase the level of tuition, and this ability will receive The regional market, competitors, and the overall economic conditions of the region are affected. Therefore, the competition of competitors and the downturn of the macro economy may make the company's profit less than expected; Second, the private higher education market ranks only fifth, and may be suppressed by competitors; third, it is still necessary to consider the impact of national policies on private education and the possibility of introducing policies that weaken the profitability of private education; fourth, Yangcheng The New Express News under the Evening News reported that the founder of the company, Zhang Zhifeng, was detained by the Guangzhou Intermediate People’s Court for 15 days for failing to pay the construction company's project payment for four years. There are also many, known as Lao Lai.

Summary

Hua University is a large-scale private higher education and vocational education group in South China, which provides practical-oriented courses focusing on applied science. The company operates three schools in Guangdong Province, including Huali College, Huali Vocational College and Huali Technician College. It is the second largest private vocational education service provider in South China.

At the end of 2017, the mainland suddenly started a wave of education companies listing in Hong Kong, which has spread to this day. At present, it is nothing new for mainland education companies to apply for listing in Hong Kong. After all, these education companies rely on the advantages of the education industry to have high revenue, high gross profit, bright cash flow and extremely low asset-liability ratio. It was listed soon after the hearing of the Hong Kong Stock Exchange, but the road to the listing of Hua University appeared to be a bit "tortuous". The company once submitted the prospectus to the Hong Kong Stock Exchange twice on December 28, 2017 and January 29, 2019, but both ended in invalidity. After hovering in front of the door of the Hong Kong stock market for two times, the third time the prospectus was submitted was July 29 this year. "The hard work paid off." Enter the "private undergraduate concept stocks".

The private higher education and vocational education market where Hua University is located has a bright future, and the market demand in South China is still strong, and the company is expected to continue to grow in the future. The high profit rate of the education industry also gives it strong profitability. It not only realizes the hematopoietic function but also has a solid balance sheet, and the financial risk is relatively small. In recent years, tuition fees have risen continuously, and performance is not unglamorous.

However, it should be noted that factors such as insufficient teachers and the per-student area of ​​teaching and administrative buildings that have not reached the qualified standard are the important reasons for the failure of the two consecutive listing applications of Hua University. Therefore, it is imperative to increase investment in educational resources. Row. Although the risk of non-compliance has been reduced before, it is still not up to the standard, especially the school setting standards are far from being qualified. Although the company's own risks have not yet been fully recognized by the market, it has been so patient to update the prospectus three times and continue to sprint the capital market, and its spirit is also persevering.

For Hua University, which has hit the Hong Kong stock market three times, as a leading large-scale private education company in South China, it has successfully landed ashore and has completed its important development goals. However, in the face of compliance pressures and high liabilities, the ability to maintain stable profitability will be the first test of the market. The medium and long-term investment value is cautiously optimistic and further observation is required. In the short term, from the perspective of IPO subscription, the stock market is slightly larger, cornerstone investors have a 6-month lock-up period, the valuation is appropriate, the sponsor's past performance is acceptable, and the IPO market is expected to be neutral and positive, dark market or first listing There is a certain possibility of pulling up. Investors can participate in the subscription at their discretion according to the amount of personal funds.

(Note: The opinions stated in the article only represent personal opinions and do not constitute any specific investment opinions or suggestions. Please treat them rationally. There are risks in the market, and investment needs to be cautious.)

Article Source: Zunjia Finance. Zunjia Securities (Hong Kong) Co., Ltd. is a licensed corporation recognized by the Hong Kong Securities Regulatory Commission (Central Code: BJJ179). It has been granted the 1, 2, 4, and 5 regulated activity licenses, providing securities and futures, etc. Financial services are also regulated by the Hong Kong Securities Regulatory Commission.

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Label group:[Chinese University] [University courses] [Holley] [Huali Technology] [Huali Technician College

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