HK-listed Wisdom leads slide in education stocks on China's revised rules

Wisdom Education International Holdings

13/08/2018 08:28

** Shares in Wisdom Education International  6068.HK  lead
falls in Hong Kong education firms after China released revised
private education regulations which potentially bars group-based
companies from growing through mergers and acquisitions
    ** The news sends Wisdom 38 pct lower to HK$4.05, the lowest
since Dec. 7. It is followed by Tianli Education  1773.HK  which
plunges 36 pct to an all-time low of HK$2.05. Yuhua Education
 6169.HK  dives 32.8 pct to HK$3.60, the lowest since Dec. 27
    ** The Ministry of Justice released the revised private
education regulations late on Friday, including incremental
government support for private schools, standardisation of
setting up and operating private schools, and protecting rights
of school organisers etc (https://bit.ly/2P53OPp)(https://bit.ly/2MFUIqD)
    ** Nomura says there is some uncertainty over the regulation
stating that education groups are not allowed to control
not-for-profit schools through mergers and acquisitions, and the
change will hinder purchasing via equity interest
    ** Nomura says firms that have acquired primary, middle or
high schools in the last 2 years include China Maple Leaf <1317
HK>, Wisdom  6068.HK , Minsheng  1569.HK  and China Yuhua
 6169.HK . While Virscend  1565.HK , New Higher Education
 2001.HK , and China Education  0839.HK  have bought
kindergartens and universities
    ** Jefferies says imprecise terms and language in the
recently reviewed draft legislation for the amendment of the
Promulgation of Private Education Law have spooked the market,
and it expects more clarification in the next draft legislation
    ** Jefferies believes the variable economic interest (VIE)
structure will remain intact. With group-based education
companies potentially barred from M&A, this means companies
would have organic growth without acquisitions
    ** Shares of Mapleleaf Education  1317.HK  plunge 28 pct,
New High Education  2001.HK  loses 27 pct, Hope Education
 1765.HK  drops 23 pct, China Education Group  0839.HK  falls 20
pct. China Xinhua Education  2779.HK  eases 19.8 pct, and
Minsheng Education  1569.HK  is down 18 pct     
    ** Hong Kong benchmark index  .HSI  falls 1.5 pct

 (Reuters Messaging: donny.kwok.thomsonreuters.com@reuters.net)