Hope announced employees share option scheme, and reiterated company’s stable business outlook
Recent Two-sessions reaffirmed positive policy for vocational education/training; Stable policy environment remains our base case
BUY: Near term hit by equity market turbulence, but does not impact fundamentals for Hope and overall higher education sector
Hope released employee share option scheme
Hope announced the share option scheme for its core staffs on Mar 3, aiming to provide incentives and help improve LT stable development for the Group. The scheme covers more than 5,000 employees including management and schools’ teachers. Hope will purchase shares for employees from the market, not exceeding 10% of total number of issued shares, with 10-year period. Hope also emphasized its business on-track and refuted market rumours regarding VIE structure and offshore funding. Hope highlighted: 1) “for-profit” registration is on-track and will see good progress in this year; 2) With the acquisition (link) of Shuanglin Education on Dec 24, 2021, Hope newly acquired 400mu land in Chengdu Tianfu New District, and plans to build a new modern industrial college; 3) Adequate organic development room with overall existing capacity utilization of 47%; 4) Hope will focus on overseas expansion.
2022 Two-sessions reaffirmed policy support
2022 Two-sessions reaffirmed supportive policy for vocational education, especially for vocational training, which is in-line with our expectation given the first “5-year Plan” for vocational training was issued back on Jan (our report). Two-sessions mentioned to build a batch of public training bases with RMB100bn fund support from social security fund. For private education, the key words changed from “support and regulate” in last 3 years to “regulate”, in our view, with respect to listed higher education names’ upcoming transition to “for-profit” status, reduced gov. subsidies and tax benefits have been widely anticipated. Moreover, we think more government resources are directed to K- 9 compulsory segment given its “non-profit” status.
Fundamentals stable despite equity market turbulence
Overall, we believe stable policy environment remains our base case for higher education names, and we remain positive on overall higher education sector on solid organic growth amid policy tailwind for vocational education. We reiterate BUY on Hope and keep TP at HKD2.3, on 15x next 12-mo forward P/E (unchanged). Our TP implies 16x/13x FY22/23E P/E. Besides Hope, we also like CEG (839 HK) and New Higher (2001 HK), and recently upgraded Yuhua (6169 HK)’s rating from NEUTRAL to BUY (our report). Key risks: tuition fee and enrollment increase, operating cost execution, and policy risk.