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EDU: An Old Man Waiting For Time Bomb

|Includes:New Oriental Education & Technology Group Inc. (EDU)

A really look at EDU's fatigue and dooms

A time bomb.

According to EDU's annual report and recent Muddy Water's insightful research, EDU's Beijing schools generated $200m revenue, and it is clearly for profit. However, it enjoys a 0% EIT tax rate. Something is wrong here.

Why other centers don't have this tax treatment? Very likely the Chinese government will either give 0% to all EDU centers, or, retroactively collect the tax from EDU. Bummer.

Cinderella has to leave before midnight, when the crystal shoes will turn into pumpkins and mice.

Stock dive another 25%.

Old men's clubs

EDU senior management average age is 50, the Chairman, CFO and EVP Zhou. They sell stocks and enjoy lives. They lost the lust and drive that other education companies like XRS has. No wonder is losing ever battle in every city to other competitors.

Running out of map

There is no where else to open new centers. The more centers they open, the less profitable it becomes. Even for today, Beijing accounts 1/3 of total national revenue. The market is saturated, period. CFO said they had over 500 centers in China. They now need to focus on increasing the "margin" ask increasing ASP. Look, see how much the consumers can take it.

EDU is an old man, waiting for time bomb to bust, running out of map, with a bunch of lies about franchise business, and keep running.

I shun away from the stock. Happy shorting.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: EDU