EastBridge Investment Group Corp (OTCBB: EBIG), a provider of financial services designed to help emerging companies access U.S. capital markets, is poised to capitalize on China’s rapidly growing education sector. Its clients, Tsingda and Wonder Education, operate alongside companies like Global Education & Technology Group (NASDAQ: GEDU), which has more than doubled since it agreed to be acquired, and Chinacast Education Corporation (NASDAQ: CAST), which has been trading 30% higher amid M&A talks, last week.
China’s Enormous Education Market
China has approximately 400 million students in its educational system and a 99% attendance rate to primary school. With more than 70,000 private schools opening since the 1980s and significantly higher spending on education as a percentage of income than the United States, the country has become a great opportunity for for-profit educational institutions.
The growth in the market can be clearly seen in the results of some larger companies in the space. For instance, the industry’s largest publicly traded company, New Oriental Education, saw revenues that grew from $132 million to more than $557 million between 2007 and 2011, while its net income more than tripled from 20 cents to 65 cents per share.
Cottage industries surrounding this vast educational industry are also rapidly growing. For example, after school programs are far more popular in China than the U.S., while vocational schools have been soaring in popularity as a quick way to gain an education and find a job without spending years in a traditional university.
Wonder and Tsingda Offer Great Exposure
EastBridge Investment Group owns approximately 3.4 million shares of Wonder Education and more than 2 million shares of Tsingda Education, according to regulatory filings made with the SEC. These two companies represent strong and rapidly growing companies within the booming for-profit education market in China, making them very valuable for EBIG shareholders.
Tsingda Education is a leading provider of online educational services in China, offering classes through pre-recorded lessons and in real-time via its virtual internet classroom. As of December of last year, the company operated 2,346 learning centers across the country, including 21 company-owned and 2,325 franchised locations.
Wonder Education has been named one of China’s ten major brands in computer education for several years by the Ministry of Information Industry, the Ministry of Labor and Social Security and Computer World. The company’s seven vocational schools have relationships with more than 20 provinces and municipalities and serve more than 12,000 students.
A Great Investment Opportunity
EastBridge Investment Group unlocks value for shareholders in several ways. First, the company offers equity dividends to its shareholders. Second, the remaining equity is held on its books as a valuable liquid asset. And finally, any stock that is sold is booked as revenues and net income that help drive growth moving forward.
Meanwhile, earnings multiples for China’s education sector continue to look strong with several recent buyouts. The average P/E in the education industry stands at about 22x, which is the highest in the country and compares favorable to the 16.3x average. And with an average market capitalization of $621.8 million, it’s also one of the most valuable industries.
The company’s stakes in Tsingda Education and Wonder Education could unlock significant value in its shares. Despite some market issues during the past few months,, the company is moving forward towards listing Tsingda and Wonder on a U.S. exchange, while both companies look for opportunities to grow its business. With these near-term catalysts in mind, investors may want to take a closer look at EastBridge.
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