New Oriental Launches Hong Kong Initial Public Offering

New Oriental Education (EDU) has today announced the launch of its Hong Kong Public Offering. This forms part of EDU’s global offering of 8,510,000 new shares and the listing of its common shares on the Main Board of The Stock Exchange of Hong Kong Limited under the stock code “9901.”

EDU’s American depositary shares (“ADSs”), each representing one common share, will continue to be listed and traded on the New York Stock Exchange, the company says.

The offering initially comprises of 510,600 new shares under the Hong Kong Offering and 7,999,400 new shares for the International Offering, (6% and 94% of the total shares respectively).

According to EDU, the total number of shares available under the Hong Kong Public Offering could be adjusted to up to a maximum of 2,042,400 new shares, representing 24% of offer shares initially available.

In addition, the company expects to grant the international underwriters an over-allotment option which will see EDU issue up to an additional 1,276,500 new shares in the International Offering, representing not more than 15% of the offering.

The offer price for Hong Kong will be maximum HK$1,399.00 per share, but the international offer price may be higher and will be set on November 3.

The company plans to use the net proceeds for investments in technologies to enhance students’ learning experience, its business growth and geographic expansion, strategic investments and acquisitions, and general corporate purposes and working capital.

New Oriental is the largest provider of private educational services in China offering a wide range of educational programs, services and products to students throughout China.

For example, its services include K-12 after-school tutoring, test preparation, language training for adults, pre-school education, primary and secondary school education and materials as well as online education.

Shares in EDU have climbed over 39% year-to-date and the stock scores a bullish Strong Buy Street consensus. Despite the recent rally the average analyst price target indicates that shares could rise a further 8% in the coming months.

One analyst saying ‘buy’ is Tigress Financial’s Aaron Ju. The analyst notes that EDU’s AST (after-school tutoring) offline long-term business trends remain stable with an upward trajectory.

“EDU’s implementation of its Online-Merge-Offline models and strong summer promotion will further drive market consolidation and student enrollments” he comments, adding “We expect to see EDU’s offline revenue and student enrollment recover after 1QFY21 and believe EDU stock price still has significant upside and recommend purchase at current levels.” (See EDU stock analysis on TipRanks)