Seeking Alpha
, Google+ (263 clicks)
Long/short equity, special situations, momentum, event-driven
Profile| Send Message|
( followers)  

Summary

  • TEDU is a provider of professional education services in China.
  • TEDU plans to raise $137.7 million in its upcoming IPO, offering 15.3 million shares, including 25% insider shares, at an expected price range of $8-$10 per share.
  • We rate this IPO a buy as TEDU is a market leader by far, with consistent demand for services.

Tarena International Inc. (NASDAQ:TEDU), a provider of professional education services in China, plans to raise $137.7 million in its upcoming IPO.

The Beijing, China-based firm will offer 15.3 million shares, including 25% insider shares, at an expected price range of $8-$10 per share. If the IPO can find the midpoint of that range at $9 per share, TEDU will command a market value of $521 million.

TEDU filed on February 27, 2014.
Lead Underwriters: Goldman Sachs (ASIA) LLC, Credit Suisse Securities (USA) LLC
Underwriters: Jefferies LLC, Oppenheimer and Co. Inc.

Overview of Tarena International
TEDU is a provider of professional education services specializing in IT education in China, and has trained over 130,000 students since its 2002 inception.

In 2013, the firm was the largest provider of IT professional education services in China, with a market share of 8.3%. TEDU offers courses in nine IT subjects as well as two non-IT subjects, which it teaches through live instruction in Beijing that is broadcast to its learning centers throughout China. This approach minimizes the costs of employing instructors and of expanding TEDU's learning centers into new areas. The firm focuses on practical education with an eye towards employment, employing hundreds of career advisers and "employer cooperation representatives" to assist in job placement for its graduates.

Valuation
TEDU offers the following figures in its F-1 balance sheet for the year ended December 31, 2013:

Revenue: $92,833,660.00
Net Income: $14,047,031.00)
Total Assets: $73,672,919.00
Total Liabilities: $25,578,223.00
Stockholders' Equity: ($63,284,084.00)

TEDU has seen massive revenue growth over the course of the past several years; for the years ended December 31, 2011, 2012 and 2013, the firm posted net revenues of $25.7 million, $56.8 million, and $92.8 million. Impressively, the firm was able to simultaneously improve its income figures, posting net incomes of $0.7 million, $9.6 million, and $14.0 million over the same periods.

A Fragmented Market
TEDU competes with other sources of professional education services in China. The market for such services is extremely fragmented-TEDU leads in market share as measured by revenues at 8.3%. Though the firm has achieved strong results in recent years, there is no guarantee that it will be able to outperform its many competitors; especially as the rising demand for IT education in China attracts new entrants into the IT education market.

Founder and CEO Has Been With TEDU Since Inception
Founder Shaoyun Han has served as TEDU's Chairman and CEO since the firm's inception. He previously served as deputy chief engineer and director of the software division of AsiaInfo-Linkage. He holds a bachelor's degree in computer application from Jilin University.

Investors Should Buy TEDU In Proposed Range
We rate this IPO a buy in the proposed range of $8 to $10.

In a spotty market, TEDU has managed to sustain massive revenue expansion--its 2013 net revenue more than tripled the figure for 2011--while also generating increased income.

There certainly is massive demand for the type of educational services that TEDU provides in China, and the firm's model for distributing its educational programs should allow it to continue to soak up that demand without overextending itself financially.

Moreover, TEDU's programs seem to have consistently provided its students with the employment outcomes that they seek; the firm's six-month post-course job placement rates for students enrolled in 2011 and 2012 have averaged over 90%, and the starting salary of students enrolled in 2012 exceeded the national average for college graduates by 14.3%.

We suspect that investors will embrace TEDU as a firm making significant and growing profits on an apparently effective product.

Source: Tarena International IPO A Buy In Proposed Range Of $8-$10