CEU exceed our revenue and earnings estimates in the third quarter as the Company again reported significant growth led by its vocational training services platform. On the earnings call, management repeated their intent to make additional investments in educational services and with over $57 million in cash and a newly found liquidity in the stock, the Company hinted at the possibility of multiple acquisitions as a use for the cash. Given the solid quarter, we are adjusting our forecast for the fourth quarter and full year 2009 and maintain our $17 price target and Strong Buy rating.
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Third Quarter 2009 Earnings Conference Call held Tuesday, November 17, 2009
Listen to archived webcast  

Presentation from the RedChip
2009 Shanghai Conference

Zack Pan CFO of CEU

Overview
China Education Alliance, Inc. (CEU) is an educational services company which offers online educational materials for all levels of education as well as on-site training and tutorials to a wide variety of clients including school teachers, university professors, educational officials, and families. CEU provides testing materials, preparation materials, research, study guides, educational audio recordings, and various certification trainings.

The Company offers more than 300,000 exams and test papers for use in elementary schools all the way through the collegiate level. The tests and related materials are available for purchase through their “Famed Instructors Test Paper Store” via their website www.edu-chn.com. CEU provides vocational training, vocational performance evaluation metrics services and employment education via their “Millions of College Students Employment Crossroad” program through which the Company has collaborated with the National Association of Vocational Education of China (NAVEC).

CEU moved from the OTC BB to the NYSE Amex on July 20, 2009.

Value Proposition

• The market for CEU's online educational services is 150 million students between age 6 and 18, which represents a $15 billion market.
• The Chinese government continues to increase its investment in education. The latest Chinese stimulus package invested RMB 40 billion in education and health.
• The leader in the China educational sector is New Oriental Education & Technology Group (EDU), which trades at 26x forward P/E.
• CEU currently trades at a forward P/E of 4.1x. At a 20x forward P/E this stock trades at $11 to $13 — an upside of 120% from current levels.

• Revenue grew 43.2% year-over-year to $10.2 million in 3Q09.
• Net income grew 51.4% to $4.2 million in 3Q09 from $2.8 million in 3Q08.
• $5.0 million in operating cash flow in 3Q09, representing 164% growth year-overyear.
• Strong balance sheet with $39.6 million in working capital.
• CEU raised total gross proceeds of $19.8 million through a public offering, issuing 3,162,055 shares at $5.50 on October 5, 2009 and the exercise of a portion of the underwriters’ over-allotment options resulting in an additional 434,308 shares on October 13, 2009.