For a sign of how healthy the business of international education in China is, take a look at the share price of China Maple Leaf Educational Systems: it has more than doubled since its Hong Kong listing in November 2014 while the Hang Seng Index has lost 13 per cent in the same period.
Supported by strong demand from China’s growing number of middle-class families who want to prepare their children for overseas studies at prestigious universities, international education providers are seeing robust growth. Total revenue of all international schools operating in China grew at a compound rate of 23 per cent per year between 2009 and 2013, and amounted to 18.4 billion yuan (HK$21.7 billion) in 2013.
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“Compared to switching directly from domestic non-international schools to overseas schools, students who attend an international school may find they experience a smoother transition to an overseas school, given their greater exposure to the English language and overseas education systems,” said Albert Yip, an analyst at GF Securities, in a research report.
The number of Chinese students studying overseas rose at a compound rate of 17.5 per cent a year between 2007 and 2015, and amounted to 523,700 students last year, GF said.
That will translate into strong demand for schools like those run by Maple Leaf, the only Hong Kong-listed operator of international schools in the mainland. Graduates from its high schools obtain both a graduation diploma from Canada’s British Columbia state and China’s national diploma, giving them an advantage in applying to schools overseas.
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Its shares have jumped from the listing price of HK$2.88 to HK$6.76 as of June 15, while on Wednesday brokerage CLSA raised its target price for the stock to HK$8.4, up from a target of HK$4.3 it set in January. It maintained a “buy” rating.
Last week, investment bank CICC added Maple Leaf to its coverage and gave it a target price of HK$9.
Maple Leaf’s net profit for the six months ended February 29 reached 125 million yuan, up 121 per cent from a year earlier. Total revenue rose 26.7 per cent to 380 million yuan.
CLSA expects the company’s revenue to rise 29 per cent year on year for the second half of its financial year. In 2017, the company’s student enrolment may increase 13 per cent, CLSA said.
Private international schools are not bound by the policies of local, provincial or national governments and China’s public education system, making it much easier for operators to expand, CICC said.
A decision in 2013 by the Chinese government to lower the weight of English in the gaokao – the nationwide university entrance exam – in an effort to promote the Chinese language and reduce the educational inequality between rural and urban areas, would also help international schools.
“The policy would force public schools to cut the hours of English classes, and in turn increase the attractiveness of private schools for parents who aspire to a bilingual education,” CICC said.
Public high schools which had built up franchises offering international curricula are also facing a tightening of government policy due to concerns over educational equality.
The independence of private schools allows them to have broader and more diverse curricula as well as greater flexibility in funding options in terms of tuition fees and the number of English classes per week, GF’s Yip said.
The comparatively cheaper fees of domestic operators make them attractive. In Shanghai, the high school fee for Maple Leaf is 81,000 yuan a year, much lower than the 290,000 yuan a year at Nord Anglia, a British company with schools in 15 countries.
The number of international schools in China reached 597 last year, surpassing the United Arab Emirates to rank first worldwide, according to a research by NewSchool Insight Media, a mainland think tank focusing on the international school industry.
Given the growth of high net worth families and the middle-class population, at least 1,000 private international schools will be needed in the coming years, the survey said.
Such demand is bringing other players into the market, and increasing competition. Property developers such as Vanke and Country Garden are expanding their international school networks.
“The demand is certainly huge and there is brand effect there,” said Kevin Tam, analyst at Core Pacific-Yamaichi. Maple Leaf is likely to maintain its market share as it is now an established brand after 20 years, Tam said.
In the coming two to three years, more private operators will seek initial public offerings, NewSchool Insight Media said.
Sources : Scmp.com
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