Chinese new education regulations to raise cost - Morgan Stanley

China Maple Leaf Educational Systems

02/10/2018 12:59

** Morgan Stanley analyses impact of China's new regulations
on education
    ** Says impact of new regulations is largely priced in, but
expects stocks to remain volatile as rules are yet to be
implemented and cos adjust operations
    ** Key new regulations on After School Tutoring (AST) are:
     1. Higher requirements on infrastructure/teacher
qualifications could raise costs
     2. AST is required to unify class names, indicating more
supervision on curriculum, and schools are encouraged to extend
hours, which could cut students' tutoring time
     3. Shortened prepayment time will impact cash flow
     4. Employee benefits could raise labor costs for some cos
    ** MS cuts rating on New Oriental Education  EDU.N  and
Bright Scholar  BEDU.N  to "equal weight" from "overweight"
    ** Also raises rating on RYB Education Inc  RYB.N ;
reiterate rating on TAL Education  TAL.N  as "equal weight"
    ** Says TAL's risk reward is more to upside given its online
business ramp up 
    ** Rise Education Cayman  REDU.O  remains as "top pick";
REDU and RYB could benefit from high growth in population and
fewer regulation impacts; REDU has high growth visibility and
compelling valuation - MS

 (Reporting by: Aniruddha Chakrabarty)
 ((aniruddha.c.thomsonreuters.com@reuters.net))