Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

China Distance Education Holdings Ltd (ADR) / Equity Bottom-Up

China Distance Education Holdings Ltd (ADR)

After relying mainly on forced consolidation for many years (with minimal worker redundancies), it appears state-owned enterprise (SOE) reform in China is finally turning towards more aggressive remedies in 2016. Authorities are bolstering the legal framework required to handle bankruptcies in a formal and relatively transparent manner; top officials have identified the sectors suffering the most from excess and / or outdated capacity; and bureaucrats have established detailed targets for capacity reductions and related job losses in those sectors. In addition, the central government has set timetables for achieving these targets, and, importantly, it has earmarked at least 100 bn RMB in funds (US$15 bn) to assist local governments in retraining and redeploying the millions of workers who will be displaced by SOE reforms. In this note we attempt to provide answers to the following questions:<ol><li>Is the apparent acceleration of SOE reforms and planned spending on job re-training and worker redeployment an attractive opportunity for private education providers in China?</li><li>If so, which companies are best positioned to take advantage of this trend?</li></ol>

After relying mainly on forced consolidation for many years (with minimal worker redundancies), it appears state-owned enterprise (SOE) reform in China is finally turning towards more aggressive remedies in 2016. Authorities are bolstering the legal framework required to handle bankruptcies in a formal and relatively transparent manner; top officials have identified the sectors suffering the most from excess and / or outdated capacity; and bureaucrats have established detailed targets for capacity reductions and related job losses in those sectors. In addition, the central government has set timetables for achieving these targets, and, importantly, it has earmarked at least 100 bn RMB in funds (US$15 bn) to assist local governments in retraining and redeploying the millions of workers who will be displaced by SOE reforms. In this note we attempt to provide answers to the following questions:Is the apparent acceleration of SOE reforms and planned spending on job re-training and worker redeployment an attractive opportunity for private education providers in China?If so, which companies are best positioned to take advantage of this trend?

Can Job Retraining Initiatives Linked to China's SOE Reform Boost Growth of Private Education Firms?

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

China Maple Leaf Educational Systems / Equity Capital Markets

For short term investors we would take the deal at strike, based on momentum for past listing in the sector.However, we wouldn't advise longer-term investors to go in for the deal. While the industry fundamentals remain strong and Maple Leaf is the market leader in a highly fragmented market, however, the company’s profitability has not been rising in line with its revenue growth over the past few years. In addition, a failed listing attempt in 2011 raises questions about the venue and timing for this listing.

For short term investors we would take the deal at strike, based on momentum for past listing in the sector.However, we wouldn't advise longer-term investors to go in for the deal. While the industry fundamentals remain strong and Maple Leaf is the market leader in a highly fragmented market, however, the company’s profitability has not been rising in line with its revenue growth over the past few years. In addition, a failed listing attempt in 2011 raises questions about the venue and timing for this listing.

Fundamentals remain weak but the IPO could deliver short-term rewards owing to likely retail driven demand

China

China Maple Leaf Educational Systems Limited is a Chinese international school operator. The Company operates high schools, middle schools and elementary schools across various Chinese cities.

China Maple Leaf Educational Systems (1317 HK)

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China Maple Leaf Educational Systems (1317 HK)

Can Job Retraining Initiatives Linked to China's SOE Reform Boost Growth of Private Education Firms?

After relying mainly on forced consolidation for many years (with minimal worker redundancies), it appears state-owned enterprise (SOE) reform in...

Daniel Hellberg

Fundamentals remain weak but the IPO could deliver short-term rewards owing to likely retail driven demand

For short term investors we would take the deal at strike, based on momentum for past listing in the sector.However, we wouldn't advise longer-term...

Sumeet Singh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)