Hailiang Education Group Inc (ADR) Takes Advantage Of Growth In The Education Sector

Global education is big business. One of the outstanding companies which is taking advantage of this growth in the education sector is Hailiang Education Group Inc (ADR) (NASDAQ: HLG).

Even with a population of less than 25 million people, education is big business in Australia.  Along with the USA, UK, France, Germany and Canada, Australia is one of the top 6 destinations for international students.  Our attraction as a destination has only been increased by the threat of BREXIT and the election of President Donald Trump.

As Federal Education Minister, Simon Birmingham said: “International education is now our third largest export sector generating more than $21 billion of economic activity in Australia, supporting many jobs and providing benefits to both Australian and international students.”  Well over half of that income is generated by universities and tertiary institutions.

Outside Australia, there is no doubt that China is one of the largest markets when it comes to delivering education services. With its estimated current population of 1.4 billion people, the Chinese market is about 56 times larger than Australia. These are mind-boggling numbers that I think will provide ongoing growth to the education sector.

The number of students in private primary, middle and high schools in China is already estimated to have surpassed 15.6 million, which is 65% of the entire Australian population.

One of the outstanding companies which is taking advantage of this growth in the education sector is Hailiang Education Group Inc (ADR) (NASDAQ: HLG). It has American Depository Receipts (ADRs) listed on the NASDAQ stock exchange and currently boasts a market cap of US$1.61B, which is equivalent to around A$2.06B.

In the past year alone, shares in Hailiang have risen nearly 900%, climbing from just above US$7 in May 2017 to hit all-time highs above US$63 in March this year. Hailiang shares were trading at US$80.78 in early June 2018.

The steady rise in Hailiang share price has attracted global investors. Citadel Advisors LLC, a US global financial institution, raised its holdings in Hailiang Education Group Inc by 78.8% during the first quarter, according to its most recent filing with the Securities & Exchange Commission. The fund owned 15,091 shares of the company’s stock after buying an additional 6,650 shares during the quarter.

Given that Hailiang educates just 0.35% of the private school market and that they are all local students, not transient international students, it seems there is still a great deal of upside potential for a company like Hailiang.

A big factor in Hailiang’s growth trajectory is the fact that it also operates multilingual classrooms. Languages used include Chinese, English, Spanish, Japanese, Korean, French, etc. Also, Hailiang Education has launched various diversified high-quality courses, such as Mathematical Olympiad courses, A-level courses, Australia Victorian Certificate of Education (VCE) courses, IELTS courses, TOEFL courses as well as SAT courses. The Company has established extensive cooperative relations with more than 200 international educational institutions and universities.

It is true that a number of comparatively small companies grabbed the education sector headlines in recent years in relation to the controversy surrounding the VET FEE-HELP scheme.

However, there are also a number of substantial and relatively stable companies servicing the education sector in Australia. Two of the largest are Navitas Limited (ASX: NVT) and IDP Education Ltd (ASX: IEL). With market caps of A$1.75B and A$1.88B respectively, these companies are of a similar size. Both are involved in facilitating access to Australian universities and providing ‘pathway’ services, largely for international students.

While there are other similar or comparative education and education-related companies in Australia, the market being served by Hailiang Education makes it a formidable player in the education space, in my opinion.

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This article was contributed by Alex Douglas, Managing Director of Monex Securities Australia (AFSL: 363 972).

The content of this article is given for general information only. As general information, no consideration or evaluation is given to the investment objectives or financial situation of any particular person. Trading and investing involve substantial financial risk. All readers of this article should make their own evaluation of the merits and suitability of any financial products and/or advice or seek specific personal advice as to the appropriateness of engaging in any activity referred to in this article in light of their own particular financial circumstances and objectives.

Alex Douglas

Alex Douglas

Alex Douglas is the Managing Director of Monex Securities Australia. He has held senior roles with numerous financial services companies both in Australia and Asia. Since first plotting currency price charts by hand in 1983, Alex has worked in a range of markets including foreign exchange, futures and equities. His passion for the markets has seen him take on a variety of roles in the industry including being a trader on the floor of the Sydney Futures Exchange, a senior executive with the MMS International division of Standard & Poor’s in Singapore and as a director in various FX and derivatives companies.