China Education Group (839.HK) Affected by newly acquired schools in short term, awaiting the improvement in the operation of schools June 28, 2019 83

PSR Recommendation: ACCUMULATE Status: Maintained
Target Price: HKDHKD14.01

Investment Summary
China Education Group has engaged in higher and vocational education. Under the
management of the Group which are experienced in operating schools, we believe the
potential improvement will be huge for the new acquired schools. However, the Group
may be adversely affected by newly acquired schools, which makes the GPM reduce and
the percentage of administration expenses to revenue rise. We believe it will take some
time for the Group to improve the operation of the new schools. Based on the net profit
attributable to owners in 2020, we assume a P/E ratio of 28x (the average of the past),
deriving a TP of HK$14.01 and maintain an “Accumulate” rating, with a potential upside
of 13.53%.(Closing price at 26 Jun 2019)

About the author

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Terry Li
Investment Analyst

Graduated from Lingnan University, with Master of Science in International Banking and Finance and Bachelor of Business Administration respectively. Specializes in analyzing company fundamentals and valuation to explore investment opportunities in TMT, Education and Financial industry.

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