Asian Dividend Gems: Minsheng Education

• Minsheng Education (1569 HK) is a highly undervalued Chinese education stock with high dividend yields. Market cap of the company has declined by nearly 90% from Jun 2018 to today.

• Minsheng Education's dividend yield averaged 5.1% from 2020 to 2022. Estimated dividend yield is 14.6% in 2023.

• Minsheng Education mainly provides educational services in China. The company is one of the leaders of China's private higher education industry.

Conclusion First

Minsheng Education (1569 HK) is a highly undervalued education stock with high dividend yields. Market cap of the company has declined nearly 90% from nearly US$1 billion in Jun 2018 to about US$0.1 billion today. Minsheng Education mainly provides educational services in China including both online and on-campus schools. The company is one of the leaders of China's private higher education industry and it is also a pioneer in the PRC private higher education industry. The company's on-campus schools includes vocational schools.

In 2018, the company had sales of 623.1 million RMB and operating profit of 362.9 million RMB. In comparison, it had sales of 2,354 million RMB and operating profit of 604.4 million RMB in 2022. In other words, sales increased by nearly 4x and operating profit increased by 67% in four years from 2018 to 2022.

However, the stock price has declined by nearly 90% from the peak in 2018 to current. Minsheng Education's shares are trading at multi-year lows. Its shares are trading at below 2x EV/EBITDA which is much lower than 9-15x multiples that it was trading from 2017 to 2019.

There has been a big scare in Chinese education stocks in the past several years especially since 2021 when the Chinese government introduced a policy known as "double reduction" aimed at cracking down on private education in China.

Despite this measure, Minsheng Education's sales and profits have increased in the past three years and Minsheng Education's focus on on-campus vocational education (which are catered mostly to adults) as well as online postgraduate studies could help the company to continue to avoid highly restrictive government policies on private education for children and young people from elementary to high school years.