Efforts to teach English to students in China’s rural western provinces are failing, the Guardian recently reported. The British newspaper highlighted the province of Gansu, which, like many other western provinces, is striving to fold itself into China’s growth story. English communication skills are viewed as “an essential skill to transform their populations into a high-value workforce,” but a shortage of qualified English teachers in the region’s public schools has left many students struggling. According to the Guardian, the failure of the public school system in Gansu “is creating opportunities for an emerging private English language teaching sector.” Hundreds of small, private language schools have cropped up in response to the current academic shortfall.
The thirst to learn English isn’t limited to students in China’s western provinces. One company that’s capitalizing on the demand for English language skills is China Bilingual Technology & Education Group Inc. (OTC BB: CBLY). Through its two private schools in central China, CBLY provides K-12 students with a high-quality education emphasizing the mastery of English language and cultural skills. Its two schools (the first was established in 1998, the second in 2002) currently serve about 9,500 students.
CBLY is recognized for its skilled faculty and the strong academic performance of its students. The schools regularly rank among the top schools in their respective regions for college entrance rates and national college entrance exam scores. CBLY’s 2011 graduating class had a 99% college acceptance rate—nearly four times the national average. Many of CBLY’s graduates go on to study abroad in the U.S., Europe or Australia. Results like these carry tremendous weight in China, where education accounts for 11% of consumer spending compared to only 2% in the U.S. Applications to CBLY’s schools doubled from approximately 4,800 for the 2009-2010 school year to approximately 9,600 for the 2010-2011 school year.
Investors can check out CBLY’s operations and hear from its management team by taking a video tour of the Company’s Shanxi Modern Bilingual School. CBLY is currently negotiating to acquire a private K-12 boarding school that would over time double its enrollment capacity to 20,000 students. Pictures of the school can be viewed here.
CBLY has historically achieved 50% net margins and average annual revenue and net income growth of around 25%. Yet, astonishingly, CBLY’s stock currently trades under $2 at a P/E of 2.6. Comparable Chinese educational companies such as New Oriental Education (NYSE: EDU) and China Cast Education (NASDAQ: CAST) trade at much higher multiples, some in excess of 50x earnings, making CBLY a strong bargain and a great way to invest in China’s push to learn English.
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