TAL Education Group (XRS)
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TAL Education (XRS), $108mm IPO, $671mm market cap
at price range mid-point of $9
Scheduled for Wednesday, Oct 20, 2010
One ADS represents two common shares |
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SUMMARY |
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. Specializes in K-12 after-school tutoring, has largest market share in Beijing
. Two other direct comparables: Ambow Ed (AMBO) and New Oriental Ed (EDU) |
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However
. EDU has not yet released to the SEC results for the Aug 2010 quarter and
. AMBO hasn’t yet released to the SEC results for the June 2010quarter
. XRS did report in its IPO filing results for the six months ended August 31, 2010
So direct comparisons are not available, although based on the following it appears that EDU is priced higher than both AMBO and XRS, in terms of price-to-sales, price-to-earnings and price-to-book value. |
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Also, see price chart for AMBO & EDU
. AMBO is up 15% since the end of August
. EDU is has had a 20% price decline since mid-September |
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VALUATION RATIOS |
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COMPARE/CONTRAST |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
Gross |
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Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
Profit |
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July-Sept qtr usually seasonally high for the following companies. |
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However, ratios below based on annualizing most recent six months |
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TAL Education (XRS) |
$671 |
6.3 |
25 |
6.1 |
6.2 |
50% |
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Ambow Ed (AMBO) |
$778 |
4.0 |
27 |
2.1 |
5.3 |
51% |
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New Oriental Ed (EDU) |
$3,460 |
9.8 |
87 |
8.1 |
8.2 |
58% |
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SIX MONTHS ENDED -- |
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XRS: Aug 31 AMBO: March 31 EDU: May 31 |
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BUSINESS |
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. Largest K-12 after-school tutoring service provider in China in terms of revenues in 2009, according to iResearch.
. Offers comprehensive tutoring services to K-12 students covering core academic subjects, including mathematics, English, Chinese, physics, chemistry and biology. |
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MARKET SHARE |
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. The K-12 after-school tutoring service market in China is highly fragmented. In 2009, XRS had a 0.26% market share in China and a 4.5% market share in Beijing, in each case as measured by revenues for the year according to iResearch. |
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NETWORK & STUDENTS |
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. XRS’s extensive network consists of 109 learning centers and 87 service centers in Beijing, Shanghai, Shenzhen, Guangzhou, Tianjin and Wuhan, as well as our online platform.
. Student enrollments increased from 67,996 in the fiscal year ended February 29, 2008 to 382,505 in the fiscal year ended February 28, 2010, representing a compound annual growth rate, or CAGR, of 137.2%.
. Student enrollment growth has been predominantly driven by new students. |
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COMPETITION |
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New Oriental Education & Technology Group Inc., Juren Education, Ambow Education Holding Ltd., Xueda Education Technology (Beijing) Co., Ltd. and ChinaEdu Corporation |
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DIVIDENDS |
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On September 29, 2010, $30.0 million cash dividend payable to shareholders from IPO |
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USE OF PROCEEDS |
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$98.3mm |
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• $30.0 million to pay a declared dividend conditional upon the completion of this IPO |
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• $30.0 million to expand network of learning centers and service centers;
• $15.0 million to build a national training center;
• $10.0 million to improve existing facilities; and
• balance for general corporate purposes, including strategic investments in and acquisitions of complementary businesses, although we have not identified any near-term investment or acquisition targets. |
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sheet & pay dividends to controlling private equity owners |
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TAL Education |
TAL, C+, 7 |
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Post-IPO shares: 75mm ADS equivalents |
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Education |
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Feb 28 fiscal year end |
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Beijing, China |
2007 |
2008 |
2009 |
Aug 6mos'09 |
Aug 6mos'10 |
IPO Mkt |
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Revenue ($mm) |
$9 |
$37 |
$70 |
$33 |
$53 |
Cap (mm) |
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Gross profit |
51% |
50% |
46% |
51% |
50% |
$671 |
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Operating profit margin |
19% |
24% |
22% |
31% |
28% |
@$9 |
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After tax income ($mm) |
$2 |
$7 |
$14 |
$9 |
$13 |
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After tax income % of rev |
17% |
20% |
20% |
28% |
25% |
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Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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annualizing June 6 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
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TAL Education (XRS) |
$671 |
6.3 |
25 |
6.1 |
6.2 |
16% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
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Growth |
mination |
tary |
rating |
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20 is perfect |
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2 |
2 |
2 |
1 |
7 |
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VALUATION RATIOS |
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COMPARE/CONTRAST |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
Gross |
|
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
Profit |
|
July-Sept qtr usually seasonally high for the following companies. |
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However, ratios below based on annualizing most recent six months |
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TAL Education (XRS) |
$671 |
6.3 |
25 |
6.1 |
6.2 |
50% |
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Ambow Ed (AMBO) |
$778 |
4.0 |
27 |
2.1 |
5.3 |
51% |
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New Oriental Ed (EDU) |
$3,460 |
9.8 |
87 |
8.1 |
8.2 |
58% |
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SIX MONTHS ENDED |
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XRS: Aug 31 AMBO: March 31 EDU: May 31 |
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AMBO: March 31 |
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EDU: May 31 |
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