It’s hard to believe, but earnings season is right upon us. In my China Strategy service, we’ll kick off the season with an announcement from one of our biggest gainers (which is up 152% in the last 52 weeks).
I’m expecting strong results from this company, which should cause a jump in the share price. Last quarter, on the day of the earnings announcement, shares popped 13%! If you’re looking to start 2008 with a bang, establish a position now before earnings come out. Interested in learning more? Click here to get the name and my buy limit for this "earnings accelerator."
Even though the company had a terrific 2007, I believe there’s more upside yet to come. Two months ago while I was in China, my China Investing Tour Group and my research assistant visited the company’s Beijing headquarters. Today I want to share their findings with you, and hopefully you’ll be as excited as I am for this company’s potential in the year ahead.
Smarten Up
Our education services provider got its start about 15 years ago, when an enterprising young Chinese schoolteacher saw a void and started a business to fill it. In the 1990s, hundreds of thousands of China’s best and brightest college graduates competed to attend graduate schools in countries like the U.S. in search of better futures. But in order to continue their educations abroad, Chinese students had to pass the TEOFL, a standardized test that measures English proficiency. Most students needed to learn English to do well on the test.
Teacher Michael Yu developed a special storytelling method of teaching English that became popular with Chinese students. At first, Yu rented auditoriums for his classes, sometimes teaching 300 or more students per class. Now his company is a legend in the test preparatory industry.
His company has diversified into other education-related businesses like language training, vocational test preparation, online education, book publishing, overseas study, and it even operates two private high schools in China’s affluent Jiangsu Province. But scholastic test preparation is still its largest profit point, generating 38% of the company’s revenue.
In the past year alone, more than one million students enrolled in classes offered by the company—a 30% increase over 2006. Adding to its success, this education powerhouse has no real competitors in Mainland China. Its main competition includes regional niche companies that lack capital and nationwide brand presence.
In addition to a strong brand name, our company benefits from favorable demographic trends in China. There are currently 600 million Chinese youths between the ages of five and 29—the age group of this company’s target market. Of those 600 million, 280 million—almost as many as the total population of the U.S.—are between the ages of 10 and 19, which is this company’s primary market. In addition, half of these Chinese students live in cities with a population of 500,000 or more. There are more than 179 cities in China with a population of one million or more, and our test prep company has learning centers and schools in over half of them. And the company is expanding rapidly into the other half.
My research associate, Dr. Fei He, led our China Investing Tour Group on its visit to the company’s headquarters in November. Fei knows this company well. He was a customer and a student of the company’s founder, Michael Yu. Before he left Beijing for UCLA to pursue a doctorate in neurobiology eight years ago, Fei took test preparation courses developed by the company. Back in 1999, Fei’s courses only cost 600 yuan per month.
Today, each of the company’s classes costs more than 1,200 yuan a month. The group’s Beijing tour guide, Brenda, has a daughter who is taking classes with the company right now, and she pays close to 2,000 yuan per month for her daughter’s studies. Clearly this business is very established because an entire generation of China’s best and brightest has taken classes at its schools and learning centers.
From our visit to headquarters, we learned that the company is expanding rapidly into second-tier Chinese cities and still maintaining high margins. Gross profit margin increased to a new high of 68% from 58% in just two years! Also, we discovered that the company’s brand name so strong that it allows it to charge a hefty premium over smaller competitors.
Buy Now Before Earnings
Our tour group’s visit confirmed my confidence in the growth momentum of the company, and I expect it to report stellar numbers this week. Do you want a piece of this education service provider’s profits? Join me today and get immediate access to this company and the other 21 names on my China Strategy buy list. Don’t delay, or you could miss out on this company’s post-earnings pop!
This year so far, the S&P has sagged 2%, but this stock is up 12%. You can’t afford not to own shares of this company because it’s one of the China Miracle’s biggest opportunities. Click here to learn more.
If you’re smart, you’ll load up on this stock before earnings come out—and ride it to a double in 2008, very possibly. (No guarantees, but you know that.) Click here to get all of the details on this education services provider. By investing in this company, you’re investing in China’s most valuable asset—its future—and you won’t be disappointed in the results. My China Strategy subscribers have already banked gains of 238%, but I’m sure that as more and more Chinese are able to afford this company’s classes, they will do so—and that will mean more profits for smart investors.
