DBS Vickers Initiated Coverage on China New Higher Education With “Buy” Rating and a Target Price of HKD5.32

(4 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 initiated coverage by DBS Vickers Securities with “Buy” rating and a target price of HKD5.32. DBS Vickers suggested that China New Higher Education would have a favorable development prospect by expanding its business from Yunnan to the whole country.

DBS Vickers pointed out that as a leading private higher education group in the southwest region of China, China New Higher Education has been dedicating to provide high quality education in a wide selection of fields in applied sciences, equip its students with practical and readily applicable skills and prepare them for the job market. The Group has achieved industry-leading graduate employment rate, which has been over 98%, for three consecutive years. Excellent graduate employment rate contributes to the improvement of the Group’s brand reputation to attract more students. DBS Vickers predicted that during the next three years, student number in its school in Yunnan School would present a year-on-year growth of 8% to 10%, and expected that the total student number would increase from 22,000 to 44,000 by 2025.

DBS Vickers held a positive view towards the Group’s future development, mainly due to the following factors: a healthy and balanced combination of mature schools and new schools leading to strong organic growth, value-added acquisition projects and potential increase in tuition fee.

The report pointed out that China New Higher Education would proactively seek for acquisition targets, focusing on regions with lower gross enrollment rates of higher education than the national average due to huge growth potential. In the meantime, DBS Vickers considered that through suitable merger and acquisition, the Group would be able to strengthen its business growth and produce synergies on the basis of staff training and major settings to improve the Group’s value. 

DBS Vickers expected that from FY2017 to FY2020, the Group’s CAGR of the projected profit would reach 35% and the projected price-to-earnings ratio will be 21.4 times in FY2018. A “Buy” rating was initiated by DBS Vickers with a target price of HKD5.32.