The Future looking Bright for Scholars

On Thursday China’s Bright Scholar Educational Holdings joined a long line of foreign companies trading on the NYSE.

Bright Scholar Educational Holdings “Bright Scholars” (Pending: BEDU) is the largest bilingual educational-based company in China. The firm hosts numerous institutions across seven provinces in the region. According to its website, the company is one of very few which provide lessons to boost English proficiency in the Asian nation. Bright Scholar also prepares Chinese children for studies abroad with options in art, sports, community studies and overseas camps.

Pre-IPO, Bright Scholars, was majorly owned by individuals. Among these stakeholders was Huiyan Yang, one of the richest women in Asia. The connection between Yang and the company was a major factor in the success of the IPO. In the US analysts called the company bullish. One of the reasons they gave for this rating was that Bright Scholars has real growth potential owing to its plans for expansion.

When filing its prospectus, the firm had stated that some of its proceedings would go into building more schools. Well, having Yang within the company just made things simpler. Yang is a member of one of China’s most noble families. Her family started Country Garden, a large real estate firm that develops community spaces in China. Because of Yang’s stake in Bright Scholar, the firm struck several deals with Country Gardens. Bright Scholars can get development land for expansion with lower expenditures and live up to all government regulations easily. Additionally, it gets the option to scale its business models because of the connection.

According to Bright CEO Junli He, the company will be the leading educational promoter in the region a few years to come. He stated that the company would sink the IPO funds into expanding and launching new schools to that end. The company also started working towards that goal in 2017 by shuffling qualified teachers to more challenging spaces and redesigning its curriculum. He said that increasing the company’s efficiency would result in increasing its profitability. That remains to be seen, but things are looking up so far.

For the six months leading up to the first quarter of 2017, Bright Scholar reported a 28% rise in revenue. The company attributed the infusion of revenue to an increase in the number of students that enrolled or the year, along with added tuition fees. Bright Scholar also cited increased fees as the reason it turned its 2015 losses into a significant 2016 gross profit. And that’s not the only thing going well for the China-based company. In the last three years, the company has shown a 33% CAGR, much higher than of some competitors. Post-IPO Bright Scholars will have a price/sales ratio of 9.01x putting it at number two overall in the Chinese educational market. TAL Educational Group still ranks first at 16.7x.

At the moment there’s nothing much that investors can do except sit back and see what happens. The company may have good prospects but then so did Snap, and you may have noticed it’s not doing as well now.

Morgan Stanley and Deutsche Bank managed this deal.