China Bilingual is an education company operating K-12 private boarding schools in Shanxi and Sichuan. The Company is at the forefront of preparing Chinese students for enrollment into a prestigious U.S. university or top-tier Chinese College, honing students for the rigorous qualifications via an innovative, high-quality educational platform which emphasizes fluency, as well as cultural skills in both Chinese and English.
With revenue for the 8-month period ending Aug. 31 (fiscal year end changed to ending Aug., in order to better reflect school year) up 6.6% and net income rising 0.4%, CBLY continues to execute on a winning strategy of providing superb education that results in the Company’s schools regularly ranking at the top for college entrance rates. Q1 FY12 financials show revenues up 74% year-over-year to $10.4 million.
The Aug. 31, 2011 acquisition, via entry into an equity transfer agreement to purchase all equity of Shanxi Rising School (now Shanxi Modern Bilingual School – South Campus), puts projections for future EPS markedly higher as CBLY continues to grow its infrastructural footprint. CBLY, as a private school operator, is not subject to income taxes and thus the Company is able to obtain an average net margin of approximately 50%. Shanxi Modern Bilingual School (founded in 2002) is an impressive campus with 82 acres containing 2.3M sq ft of facilities, including student dormitories, and serves some 5,428 students in 138 classes (capacity of 10k).
Education is the third largest category for Chinese consumer spending (just behind housing and food at 11% of total) and the Chinese government has set a substantial increase from previous levels for education sector spending in 2012, with a 4% of GDP spending target. This is a great field for CBLY with lots of potential and the Company is dedicated to growing its successful model via new teaching methods and expansion into new infrastructure, as well as new methods like training services and international exchange programs.
Having grown revenues and earnings at roughly 25% annually alongside infrastructural growth, a figure set to increase with increases in education spending, CBLY is now able to accommodate some 20k students total and currently has a staff consisting of roughly 1.9k (teachers, administrative/management, support) serving a study body of around 13,220. New capacity should allow the Company to nearly double enrollment over the next 18-30 months. RedChip Research projects $0.51 EPS for FY12 and has issued a potential 12-mnth $4.40-5.00 price target.
Chairman and CEO of CBLY, Dr. Ren Zhiqing, noted at the time of the Shanxi acquisition that it was indeed fortunate to be able to add such momentum to the Company’s portfolio prior to the start of the 2011-2012 academic school year. Dr. Zhiqing added that the financing terms were favorable to CBLY’s overall growth strategy ($53.2M paid in closing with the $54.9M remainder paid over a three year period).
Excellent market position and reputation, solid growth in Shanxi and Sichuan, continued dedication to fundamentals-driven infrastructural growth and an overwhelming rise in demand for exactly the kind of specialized, high-quality bilingual education CBLY can provide, all culminate in an excellent opportunity for investors. The long history of operational success and track record of academic excellence CBLY has established will serve the Company well as it pursues further acquisitions in key Chinese education markets.
For more information on China Bilingual Technology and Education Group Inc. please visit the Company’s website at: www.ChinaBilingualEdu.com
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