Recently, K12 track leader Dashan Education (大山教育) submitted a prospectus to the Hong Kong Stock Exchange in preparation for an IPO in Hong Kong. Prior to these two other K12 companies – Zhuoyuejiaoyu (卓越教育) and Scholar education group (思考乐教育) – were listed on the Hong Kong stock exchange.
Established in 1998, Dashan Education mainly provides after-school education services in primary and secondary schools in Zhengzhou. It currently has 80 self-operating teaching centers (one in Xinxiang and the rest in Zhengzhou) with 58,000 students for the first three quarters of 2019.
The classes offered by the company are regular classes (20-25 students), high-quality classes (8-12 students) and VIP classes (1-3 students). The covered subjects are English, Chinese, and mathematics. An online learning platform has also been developed to aid the tutors.
According to the prospectus, in terms of revenue, the firm ranked second in Henan province, with a market share of 2.2% and CNY 50 million away from the first place. The after-school tutoring income of Henan in 2018 was CNY 31.4 billion, with a compound growth rate of 12.5%; it is expected to exceed CNY 58.9 billion by 2024. Zhengzhou's top five market share is 61%, and Dashan Education's market share is about 17.5%.
Judging from the performance of the past three years, Dashan Education is still relatively small. In 2018, its revenue was CNY 290 million, and in 2019 it was estimated to reach above CNY 300 million, with a net profit below CNY 50 million.
In terms of business, primary schools account for about 66% and junior high schools account for 33%. The rest are teaching materials, books, and brand usage fees. The contribution of online courses is basically negligible, with only just above CNY 100,000 income in 2018 and CNY 366,000 in the first three quarters of 2019. From January to September 2019, the franchise income was CNY 3.6 million, which was mainly completed by 12 franchisees. In addition, English contributed most in the course category.
Prior to the filing, Zhang Hongjun (张红军), the founder of the firm, directly held 87.27% through Ruitian International (瑞天国际直接持), a wholly-owned company and the remaining 12.73% was held by Baitai (百泰) which is mainly owned by executives.
Zhu Quanxing (朱泉星), managing director of BNP Paribas and China Investment Bank, told FirstInsight that, from the end of last year, the education stocks of Hong Kong stocks have gradually recovered, especially for the education stocks in the Greater Bay Area. The market has ushered in a new wave of investment cycles for education stocks and has digested negative uncertainties. If there is no special education policy in 2020, it will be a good year for the development of education stocks in Hong Kong.