Chen Lin Education Group Holdings Limited provides private tertiary education services in the People's Republic of China. It operates Jiangxi University of Applied Science, a private university; and Jiangxi Wenli Jishi College, a full-time vocational college that provide undergraduate, junior college, and vocational programs, as well as various education related services. The company was founded in 2002 and is headquartered in Nanchang, the People's Republic of China.

China

Chen Lin Education Group Holdings Limited

Consumer Cyclical

The company does not pay dividends at all, or it pays them sporadically. There have only been a few years with dividend payments in the past ten years. 

1593.HK reported revenue of CNY 549mn in the last 12 months, up 3% from FY22. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. 

The stock has been falling steadily in the past six months, losing 14% in total. The stock has lagged its global peers from the same sector and industry (as shown above), underperforming then by 13ppts in total. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.1 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

1593.HK has very poor trading liquidity. It will take several trading days for the average private investor to sell a common position under normal market conditions. Liquidity is usually stable and becomes extremely unfavourable on the days with the lowest activity. However, under highly turbulent market conditions, the trading volume tends to improve significantly. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note resilient historical revenue growth and robust profitability, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, negligible return on capital, weak debt servicing capacity, inadequate interest coverage, and an unfavourable capital structure.

In highly turbulent market conditions, 1593.HK is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, 1593.HK is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to minimal. We would also like to highlight the minimal intraday volatility of the instrument. 

Considering past and projected metrics, the stock is 'expensive' compared to its peers. Specifically, the stock is 'expensive' on P/E, overvalued on EV/EBITD. 

Chen Lin Education Group Holdings Limited

HK$ 1.27

3

Chen Lin Education Group Holdings Limited

HK$ 1.27

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

HK$ 1.27

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