20161013-招商证券_香港_-枫叶教育-01317.HK-Positive_site_visit_takeaways._BUY_on_any_dips_13页_2mb_2mb

Summary of Maple Leaf Education (1317 HK) Report

Core Content

This report from China Merchants Securities (HK) provides an in-depth analysis of Maple Leaf Education (1317 HK), focusing on its financial performance, expansion strategy, and market position. The report highlights the company's value proposition, financial growth, and recommends maintaining a "BUY" rating despite recent share price declines.

Main Points

• Positive Site Visit Takeaways:

  • The site visits confirmed that Maple Leaf's schools offer good value for money.
  • Maple's tuition fees are only 20% of its peers, making it accessible to a larger mass market.
  • The company has a competitive advantage with the largest international distribution network.

• Student Growth Expectations:

  • The report continues to expect a 19–20% YoY increase in student numbers for FY16E and FY17E.
  • In the 2016 school year, 70% of high school graduates went to overseas universities, with ~70% to Canada.
  • The company's expansion strategy focuses on middle and elementary schools to ensure a steady flow of students into its high school.

• Financial Performance:

  • The company's financials show consistent growth in revenue and net profit.
  • The recurring net profit for FY16E is expected to be 257 RMB million, with a YoY growth of 21.3%.
  • EPS (recurring) is projected to be 0.19 RMB for FY16E, increasing to 0.31 RMB for FY18E.
  • DPS (recurring) is expected to grow from 0.11 RMB in FY16E to 0.19 RMB in FY18E.

• Valuation Metrics:

  • The target price for FY17E is HK$7.71, unchanged from the previous estimate.
  • The P/E ratio for FY17E is 30.0, while the P/B ratio is 4.1.
  • The company's ROAE is projected to increase from 13.9% in FY16E to 20.2% in FY18E.

• Share Price Performance:

  • The share price has pulled back following a recent rally, attributed to profit-taking and weak market sentiment.
  • Despite this, the report advises investors to "BUY on any dips" due to strong fundamentals.

• Student Numbers and Utilization:

  • The company is expected to report 19,353 students in FY16E, growing to 23,020 in FY17E and 27,930 in FY18E.
  • Utilization rates are expected to rise from 64% in FY16E to 65% in FY17E and FY18E.

Key Financial Data (RMB mn)

Student Growth and Utilization

Student Growth Rate

School Expansion

Market Position and Valuation

• The company is compared to other listed education operators in China, with a PEG ratio of 1.4 and a dividend yield of 2.0%.
• The report emphasizes that Maple Leaf's fundamentals remain strong and that it is a good buy on dips.
• The company's revenue and net profit are expected to continue growing at a steady pace, with a consistent increase in the EPS and DPS over the forecast period.

Conclusion

Maple Leaf Education continues to show strong growth in student numbers and financial performance, with a clear strategy to expand its middle and elementary schools to support its high school growth. The company's low tuition fees and competitive advantages position it well in the market, and the report recommends maintaining a "BUY" rating despite current market conditions.