According to the ranking of the alumni association in 1525, Bridge Education (1525 HK-HK$6.47) ranks 1st / 12th among the private universities in Shanghai / China. The number of undergraduates accounts for ~ 88% of the total number of students, which is one of the highest proportion in the industry.
The company currently trades at 8.3 / 7.6 times its 22-year forecast price-to-earnings ratio, with a compound annual growth rate of about 27% for three-year earnings, with a valuation similar to that of small higher education companies in the industry. Despite having a very high-quality college, the company's share price seems to lack a catalyst in the short term. Recently, the company announced the adoption of a share incentive scheme, which is likely to support the share price.
Unique geographical advantage-the source of future students is not a problem.
In view of its (1) the attractiveness of schools in first-tier cities, (2) the development of Lingang New area has provided more employment opportunities for graduates, thus attracting more students from other provinces. (3) the number of babies born in Shanghai has increased from 62000 in 2002 (college entrance examination students in 2020) to 121000 in 2012, providing an adequate source of local students for schools in the future. Therefore, we believe that the source of students does not pose a problem to the future growth of the company.
Highly deterministic tuition fees and the growth of the number of students
In the 20x21 academic year, we estimate that courses with tuition fees of more than 30000 yuan account for about 79% of new students, driving the overall average tuition fees for fiscal year 21 (1-4 students) to increase by about 10% year-on-year to 25800 yuan. In view of the fact that the average tuition fees for freshmen are higher than those for graduates, the average tuition fees are expected to increase steadily in the coming years. The number of undergraduate and junior college students is expected to reach 18.7 picks 2.6 thousand, accounting for 88% of the total. Looking ahead, the completion of the two new dormitories will increase the student capacity of the campus by a further 4000 students to 26000 students in the 21st academic year, compared with about 22000 in the 21st academic year. The average tuition fee and the increase in the number of students will be the main driving forces for endogenous growth.
The share incentive scheme may support the share price.
The company announced a stock incentive scheme to motivate employees by buying shares on or off the floor, up to a maximum of HK $100 million or 5% of the total number of shares issued. Based on the recent closing price, the company can buy about 15.4 million shares, accounting for 3.7 per cent of issued shares or about 36 per cent of free liquidity. We believe that the plan may provide downside protection for share prices in the short term.