Leader Education, third-largest private higher education firm in China’s Heilongjiang province, seeks US$70 million from Hong Kong IPO

Leader Education plans to use the net proceeds raised from the IPO to expand its campus and repay existing debt
Company is the third Chinese private university operator to list in Hong Kong this year

IPO

Georgina Lee

Published: 7:36pm, 21 Jul 2020

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Leader Education, the third-largest private higher education provider in China’s northeastern Heilongjiang province in terms of admission quotas, is seeking to raise up to US$70 million in an initial public offering in Hong Kong that will kick off next week, according to a source familiar with the transaction.

The company is targeting a debut on the main board in August, the source said. It is currently marketing the deal to institutional investors. Leader Education plans to use the net proceeds raised from the IPO to expand its campus and repay existing debt.

It is the third Chinese private university operator to list in Hong Kong this year, following Cathay Media and Education, which listed in July, and Shanghai Gench Education, which listed in January.

The company operates Heilongjiang College of Business and Technology in Harbin, which offers 24 undergraduate majors spanning economics, railways, business, engineering, arts and literature.

According to its preliminary listing document, Leader Education’s admission quota – the maximum number of students allowed by China’s education authorities – increased to 2,800 during 2019-2020, the last school year, from 2,219 during the 2016-2017 school year. The quota ranked it third among all private higher education institutions in the province, according to consultant Frost & Sullivan, as cited in the document.

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Huatai International is the sole sponsor for the transaction, according to the document. The brokerage was not immediately available for comment.

More than 90 per cent of Leader Education’s revenue is derived from tuition fees, with the rest coming from boarding charges. For the full year of 2019, its net profit stood at 70.36 million yuan (US$10.1 million), up 23 per cent from 57.15 million yuan in 2018, while its revenue stood at 138.21 million yuan, up 17.6 per cent from 117.49 million yuan a year earlier.

The company’s IPO comes amid the coronavirus pandemic, which has forced educational institutions to shut. And while the outbreak has forced its students to use online learning as they stay away from campus until the fall semester of the incoming 2020-2021 school year, Leader Education said it did not expect the pandemic to have a significant financial impact on its operations for the school year ending August 2020.

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“We do not expect to refund tuition fees, as we have been rendering education services online,” it said in the preliminary document, adding that it might, however, face challenges if the outbreak is prolonged.

According to Frost & Sullivan, student enrolments in private higher education institutions in Heilongjiang are expected to increase to 119,600 this year from 117,200 in 2019. This increase is expected to yield revenue of 2.5 billion yuan for the sector in the province, up 8.7 per cent from 2.3 billion yuan last year. Across China, private higher education revenue is tipped to grow 11 per cent this year to 150.2 billion yuan.

The trading performance of the two other higher education providers has been mixed. Cathay Media and Education, which offers undergraduate courses focusing on media and the performing arts, has risen 18.1 per cent since its listing on July 15, closing at HK$5.81 on Tuesday. Shanghai Gench Education, meanwhile, has declined 10.6 per cent since its listing on January 16, and closed at HK$6.09 on Tuesday.

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