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The company announced on the evening of January 20 that it had reached a preliminary intention with the shareholders of Beijing concave-convex Education Consulting Co., Ltd. (hereinafter referred to as "concave-convex Education") on the company's capital increase / acquisition of education shares. The company reached a preliminary intention with the shareholders of Changsha Siqi Education Consulting Co., Ltd. (hereinafter referred to as "Siqi Education") on the acquisition of Siqi Education shares, and signed a Memorandum of Capital increase / acquisition. Our comments on this are as follows:
Comments:
Concave-convex education and Siqi education are well-known in the industry. Siqi education is the leader of K12 training in Hunan. Siqi Education enjoys a high reputation in the industry, and its scale is second only to New Oriental Education & Technology Group, TAL Education Group, University Education, as well as OneSmart International Education Group Ltd, Jinghan Education, Excellence Education, Giant Education, Anli Education, Longwen Education and so on. The network is located in Changsha, Zhuzhou, Hengyang, Loudi, Changde, Yueyang and other major cities in Hunan and Wuhan, is the largest K12 training institution in Hunan Province. In this transaction, Siqi Education was valued at 600 million yuan before investment, and the regular general will acquire a stake of not less than 10% of Siqi Education by way of acquisition or capital increase.
Concave-convex education is a personalized training institution with clear business model and characteristic development path. Concave-convex education classes accounted for 40%, one-to-one accounted for 60%, launched "personalized teaching prescription" and personalized "teaching prescription" model, in the way of "direct alliance" to second-and third-tier cities where educational resources and advanced educational concepts are relatively lacking. Concave-convex education has received tens of millions of strategic investment from Kexing Capital in September 2016. In this transaction, concave-convex education was valued at 260 million yuan before investment, and the regular general will acquire no less than 10% stake in concave-convex education by way of acquisition or capital increase.
On the basis of Longwen education, the company holds hands with Siqi education and concave-convex education this time, and the business territory of K12 training is further expanded to form a K12 training alliance with personalized 1-to-1 education and team courses, with outlets all over first-and second-tier cities. The competitive advantage has been further consolidated, and the industry status has been significantly improved. At the same time, Siqi Education and Convex Education have long had an in-depth cooperative relationship, and they have jointly established Changsha Siming Education and Changsha Dingfeng Education to open up the Changsha market. This frequently holding hands with the two will help them form a stronger alliance.
Concave and convex education: fully integrate "education + technology", the fast-growing personalized education brand "education + technology" integration, launch the "holographic classroom" model to reduce the difficulty of network replication. The holographic classroom consists of four links: 1) Learning problem diagnosis: a multi-teaching mode score scheme is jointly issued by the software system and the experienced teacher team. 2) face-to-face teaching: one-to-one teaching in small classes on Saturdays and Sundays. 3) preview and after-class study: review, consolidate and preview high-quality online courses through Beijiao Media Interstudy Network from Monday to Friday. 4) answer questions: students can access the mobile question answering system through mobile phones and bump Pad, and teachers in the whole country can answer questions online. The data of evaluation, preview, review and answering questions are all deposited in a concave and convex system to reduce the risk of student loss (source: self-media Nine Palace gossip). At the same time, the concave and convex are also exploring the dual-division classroom model, that is, the teachers at the headquarters broadcast live, the network teachers supervise and tutor the students, and the general courses (Mathematical Olympiad, English, composition) are broadcast nationally, and the localization courses are broadcast live in various regions.
Aim at second-and third-tier cities to achieve rapid growth in the number of outlets. At present, the growth rate of K12 training market in first-tier cities such as Beijing and Shanghai is relatively slow (10%, 20%), but the growth rate of K12 training market in second-and third-tier cities is very fast. Concave-convex education has been established for only five years and is aimed at second-and third-tier cities. It already has more than 600 franchise schools, 6 directly operated schools and 14 associated schools. The company not only outputs standard teaching management process and teaching content for joining schools, but also provides AtERP 5.0integrated management system, teaching and lesson preparation system and autonomous learning system to help local training institutions move from extensive management to fine management. Concave-convex education also through the use of concave-convex Pad to grasp the payment of students around the situation, class consumption.
The joining cooperation mode of concave-convex education can be divided into three forms: standard school joining (campus area is more than 350 square meters), flag school joining (campus area more than 450 square meters), and urban partners. concave-convex education provides the whole process support for franchisees.
Zhang Jinwei, founder of concave-convex education, has rich experience in the education industry. Zhang Jinwei founded the Big Brother Education Group, joined New Oriental Education & Technology Group in 2008 to create and operate the General Department of Excellence, added the admission University Education Group at the end of 2009, and founded the concave-convex Personality Education Group in 2011.
Siqi Education: Hunan K12 training leader, the regional influence of Siqi education curriculum covers primary school to senior high school, with 67 campuses, distributed in Changsha (49), Zhuzhou (6), Loudi (2), Hengyang (6), Changde (1), Yueyang (2) and Wuhan (1). Siqi Education is good at cooperating with excellent partners, introducing concave and convex personality education, British EDC International Children's English (NASDAQ listed company), music education (Siqi Art Crown), art education (Siqi painting) and other brands, constantly expanding training categories. Relying on the excellent brand influence in the regional market, Siqi Education has expanded its user base and customer unit price, and has maintained rapid growth since its establishment in 2009. Siqi Education pays attention to team building and talent motivation. For teachers to maintain a high salary and high welfare policy, the company's per capita income level is the national leader in the K12 training industry.
Risk factors.
Integrate adverse risks.
Profit forecast and valuation rating
As the specific investment scale of this transaction is not clear, ignore the contribution of this transaction and Eddie Education for the time being, and maintain the performance forecast: based on the Longwen Q4 consolidated table assumption, the company's fully diluted EPS for 2016-2018 is expected to be 0.05kg 0.14x0.17 yuan. The current share price (9.99 yuan) corresponds to a 2017 PE valuation of 70x. Considering that the trading method of Eddie Education is not clear, such as only considering the profits from Little Red Riding Hood, British Education and other projects, the profit of the company's education sector exam preparation in 2017 is about 250 million yuan. Taking into account the profits from Little Red Riding Hood, British Education, Eddie Education and other projects, the company's education sector exam preparation profit in 2017 is expected to reach about 400 million yuan, corresponding to a market capitalization of 16 billion yuan according to the 40X PE valuation. It is expected that the net profit volume of the original LED business will be maintained at about 50 million yuan, corresponding to the market capitalization of 1.5 billion yuan according to the PE valuation of 30X, with a total market capitalization of 17.5 billion yuan. The company's current market capitalization of 15.2 billion yuan, there is still room to rise, to maintain the "buy" rating. It is recommended to choose the opportunity to enjoy the growth dividend of the "education platform".