AMBO Shares Could Climb Sharply
Driven by Novel Solutions for $2.5 Trillion Loss of Business in
U.S. and China from Semiconductor and Tech Labor
Shortages
Atlanta, GA --
February 25th,
2019 -- InvestorsHub
NewsWire --
Emerging MicroCaps
-
Deloitte
estimates the growing shortage of skilled workers in U.S. projected
to cost $2.5 trillion in lost business over next ten years and
China suffers the same problem.
-
Ambow
owns patented HR
job training technology that can provide large numbers of skilled
workers for integrated circuit makers and tech industries in U.S.
and China that is new area of strong interest to
investors.
-
Founded in
Silicon Valley, Ambow Education Group has built an
impeccable reputation for excellence in China and owns U.S.
patented AI and hologram HR learning technology to train large
numbers of skilled workers for chipmakers and tech
jobs.
-
Ambow
Education reports
over $62 million cash plus other assets over $300 million available
for sales-increasing acquisitions, and
9-month 2018 sales of US $52.8 million pointing to over $100
million for 2019.
-
Ambow's
strong growth is being fueled by record HR needs from over 4,000
corporate and 200 university partners.
-
Market comps
demonstrate Ambow share price of $6.35 should
be $22.00, plus very strong growth potential.
Overview
Deloitte estimates the
U.S. and global labor shortage is
reaching a critical point and is restricting what could be much
higher growth for Integrated Circuit manufacturers and tech
companies. For the
first time, there are now more job openings than there are eligible
workers to fill them. The key word here is "eligible", meaning
skilled. Private payrolls are growing less than expected owing to a
shortage of skilled labor to fill the demand for high tech jobs in
integrated circuit manufacturing and tech companies where strong
economic growth has been expected to continue,
but is
disappointing. Deloitte estimates that the U.S. alone could suffer
$2.5 trillion in lost business over the next ten years if skilled
labor supply continues to fall short.
Ambow
Education
Group (NYSE:
AMBO) is a leading national
provider of educational and career enhancement services in China
and is now entering the U.S. market. Ambow's business addresses two
critical demands in China's education market; the desire for
students to be admitted into top secondary and post-secondary
schools, and the desire for graduates of those schools to obtain
more attractive jobs. Founded in Silicon Valley
and relocated to China in
2000, Ambow built its core technology
innovation system and currently holds a competitive advantage in
technology innovation among China's education services
industry.
Ambow
was awarded a
patent from the United States Patent and Trademark Office for its
innovative Adaptive Computer-Assisted Learning System and Method
platform for enhancing learning outcomes, which makes it the first
China-based education company to receive a U.S. patent in the
adaptive learning methods field.
With its
extensive network of regional service hubs complemented by a
dynamic, proprietary learning platform, Ambow now services students in 30
of the 31 provinces and autonomous regions within China. In
2017, Ambow acquired Bay State College in
Boston, Massachusetts to serve as a model for Ambow's unique Cross-Border College
program that offers Chinese students both a China diploma and a
U.S. baccalaureate degree. The Cross-Border College program is
expected to provide strong growth because it offers substantial new
and needed revenue to many U.S. colleges, it appeals to millions of
aspiring Chinese citizens, and it plans to provide large numbers of
valuable skilled workers for integrated circuit makers and tech
companies.
By creating
tech-focused curricula aligned with dynamic industry demand and
coupled with the Company's enormous educational resources and
expertise; Ambow has assumed a major role in
helping Chinese career colleges and schools address five key
industry challenges: curriculum development, qualified faculty,
practical training, job placement and international cooperation. As
an example, Ambow recently established the
first college big data laboratory in China for one of their college
partners to educate students in all aspects of advanced fields,
thus preparing them for highly-skilled jobs in emerging and
fast-growing IT industries.
Another exciting
development in 2018 was the initiation of field testing for
Ambow's
holographic
virtual learning environment. The technology was implemented with
some of our college partners who, in turn, were inspired by
Ambow's
innovative
approach and have asked to set up additional programs.
Ambow
management is
confident that more colleges and institutions will be engaging
with Ambow to help improve their
competitiveness and presence in industry.
With a market cap
of only $135 million and a share price of $6.35,
Ambow
shares are
significantly undervalued and offer substantial unrealized value
coupled with solid growth prospects for 2019 and beyond.
Ambow
has strong
financials, is undergoing a major expansion in China, breaking into
the U.S. market with a model that is attractive to U.S.
Universities and students, and is expected to generate over $100
million in sales in 2019. Ambow's strong educational programs
targeting high-tech jobs are particularly attractive now that there
is a growing awareness of the critical shortage of skilled workers
for technical jobs.
Although
Ambow
has no plans to
sell them, their K-12 schools are now valued at $300 million which
is in excess of the current market cap for the entire company. With
their unique education model that is demonstrating impressive sales
gains, and with their new models for expansion, combined with a
large number of corporate and college partnerships expected to
provide large numbers of highly skilled workers in high demand, the
market is likely to soon discover Ambow and revalue shares at well
over $500 million, or closer to $22 per share based only on current
metrics and comps.
Ambow
Entering
U.S. with First Acquisition of Bay State College
Ambow
highlighted their
progress in a recent
Letter to Shareholders. "Following
the acquisition of Boston-based Bay
State College in November
2017,
Ambow
started to
implement significant operational improvements, which continued
throughout 2018, as part of our near- and long-term strategic
goals, including the restructuring of Bay
State's management
team, and optimizing the college's operations, financial efficiency
and student enrollment."
"Starting
with Bay
State College, we moved
quickly to initiate the launch of the first Cross-Border College
Program (between China and U.S. colleges) in the fourth quarter of
2018. This program is designed to fulfill demand from Chinese
students wanting to earn a bachelor's degree in a popular major,
serving as the basic
foundation to the
start of a career in China or
in the
United States. The
program will allow thousands of Chinese students who now receive
three-year diplomas from Chinese colleges - the equivalent of an
associate degree from a U.S. college - to continue their education
with a two-year advanced education program and earn a bachelor's
degree from Bay
State College or
another U.S. college."
"The
Cross-Border Program has been very well-received among our Chinese
college partners, and certain cooperation agreements and
integration plans have already been implemented. This program
further validates our mission to provide "Better Schools, Better
Jobs, Better Lives" to our students by leveraging Ambow's
established
expertise, vast resources and diversified channels in the education
space. Ambow's
unique
industry-leading position continues to benefit our core business
while we explore additional growth opportunities, including the
entry into new verticals."
"As a
recognized and highly respected educational services provider, we
are excited about the year ahead and our ability to expand
Ambow's
brand and
market position in both the
United States and
China through continued delivery of our powerful learning platform,
the initiatives of entry into new verticals, and a deepening of
cross-border relationships with other educational
providers."
Ambow
is highly
undervalued:
Considering
Ambow's
current
sales, Ambow's Price to Sales ratio of 1.9
is well below the industry average of 6.85. Based on
Ambow's
current run rate
of $70 million per year, the average Price to Sales ratio of 6.85,
commands closer to $22 per share from its current price of $6.16
per share. And this valuation does not factor in the projected
sales of $100 million for 2019.
Ambow's
unique education
model is growing rapidly with the potential to generate very large
revenues as they continue to grow in China. With the addition of
their strategy to enter the U.S. market, and to provide large
numbers of skilled workers, sales growth can become quite
impressive.
One of many
big unmet education needs is shortage in Integrated Circuit
sector
According to
a
Whitepaper, China's integrated circuit
sector is facing the potential of a severe talent shortage as the
talent pool in the industry at the end of 2017 was about 400,000,
while China is expected to need approximately 720,000 IC-related
workers by the year 2020. Considering the rapid growth of the
sector, vocational training and overseas recruitment are playing
more important roles in filling the expanding requirement to
provide 100,000 integrated circuit workers, on average, per year to
capture this ever-growing demand.
The findings of
this latest Whitepaper make it clear that traditional colleges and
universities will be challenged to meet the demand for IC
professionals for years to come. Through Ambow's continuing development of
courses and programs, the company is working hard to reduce this
anticipated shortage by preparing students to meet the requirements
of IC enterprises. Ambow's reach is strengthened greatly
by partnerships with more than 200 colleges and 4,000 corporations
throughout China," commented Dr. Jin Huang, Ambow's President and Chief Executive
Officer.
Dr. Huang
added, "The IC
sector plays a significant role in China's technology-driven
economy, and further technological development is strongly
supported by the government. We are honored to continue our
contribution to the preparation and release of this highly
anticipated Whitepaper, and we are pleased to do our part to
prepare and train professionals for the integrated circuit
industry."
Financials
Strong financial
results were
reported during the first nine months
of 2018. Net revenues and gross profit reached US$52.8
million and US$19.8
million,
respectively, representing growths of 17.3% and 7.0%, compared to
the same period in 2017. Operating expenses as a percentage
of net
revenues decreased by 10.0% throughout the first nine months of
2018, compared to the first nine months of 2017. As
of September 30,
2018, Ambow had cash resources
of US$62.1
million.
With a strengthened capital and operating structure, the company is
working diligently toward balancing growth, profitability and
cost-saving measures. A
full accounting can be seen on SEC Edgar
site. Another significant financial metric is that
Ambow
delivered
an
ROE of 27.7% over the past 12 months, which is an impressive feat
relative to its industry average of 12.5% during the same
period.
Market
Comps
Following are
current market comparisons of Ambow to companies in the same
space:
Ambow
Education
Group (NYSE:
AMBO)
$6.16
Market Cap $135
million
PE
23.16
Price to Sales
1.9
New
Oriental Education & Technology Group (NYSE:
EDU)
provides
private educational services under the New Oriental brand in the
People's Republic of China. It operates through Language Training
and Test Preparation Courses, and Others
segments.
The company offers test preparation courses to students taking
language and entrance exams used by educational institutions in the
United States, the People's Republic of China, and the Commonwealth
countries; and after-school tutoring courses for middle and high
school students to achieve better scores on entrance exams for
admission into high schools or higher education institutions, as
well as for children to teach English. It also provides language
training courses, including English, as well as other foreign
languages, such as German, Japanese, French, Korean, Italian, and
Spanish; operates a full-time private primary and secondary school
in Yangzhou seeking a full curriculum taught in Chinese and
English; develops and edits educational materials for language
training and test preparation comprising books, software, CD-ROMs,
magazines, and other periodicals; and offers online education
programs that include college, K-12, and pre-school education. In
addition, the company offers overseas studies consulting;
pre-school education; and a pilot program that permits third
parties in small cities to provide its English and kindergarten
programs, as well as overseas study tour services. As of May 31,
2018, it offered educational programs, services, and products to
students through a network of 87 schools, 994 learning centers, and
18 bookstores. The company was founded in 1993 and is headquartered
in Beijing, the People's Republic of China. Sales growth has been
consistent.
Share price
$78.58
Market Cap $12.47
billion
PE 54 to
1
Price to Sales
4.5 to 1
TAL
Education Group (NYSE:
TAL) through
its subsidiaries, provides K-12 after-school tutoring services in
the People's Republic of China. It offers tutoring services to K-12
students covering various academic subjects, including mathematics,
physics, chemistry, biology, history, geography, political science,
English, and Chinese. The company also provides tutoring services
primarily through small classes under the Xueersi,
Mobby,
and Firstleap
brand
names; personalized premium services under Izhikang
name;
and online courses. In addition, it operates jzb.com, an online
education platform that serves as a gateway for online courses
offered through xueersi.com; and other Websites for specific topics
and offerings, such as college entrance examinations, high school
entrance examinations, graduate school entrance examinations,
preschool education, and raising infants and toddlers, as well as
mathematics, English, and Chinese composition. Further, the company
provides educational content through mobile applications; operates
mmbang.com and the Mama Bang app, an online platform focusing on
children, baby, and maternity market; and provides consulting
services for overseas studies under the Shunshun
Liuxue
name.
Additionally, it offers tutoring services for students aged two
through twelve under the Mobby
brand;
provides education and management consulting, and investment
management and consulting services; and develops and sells software
and networks, as well as offers related consulting services. The
company also provides online advertising services; and engages in
the sale of educational materials. As of February 28, 2018, the
company's educational network included 594 learning centers and 465
service centers in 42 cities. TAL Education Group was founded in
2003 and is headquartered in Beijing, the People's Republic of
China. Sales growth has been impressive.
$31.73
Market Cap $18
billion
PE 55 to
1
Price to Sales
7.69 to 1
Chegg, Inc.
(NYSE:
CHGG) operates
direct-to-student learning platform that supports students on their
journey from high school to college and into their career with
tools designed to help them pass their test, pass their class, and
save money on required materials. The company offers Chegg
Services, which include digital products and services; and required
materials that comprise its print textbooks and eTextbooks.
Its digital products and services include Chegg Study, which helps
students master challenging concepts on their own; Chegg Writing
that enables
automatically generate sources in the required formats, when
students need to cite their sources in written work; Chegg Tutors
that allow students find human help on its learning platform
through a network of live tutors; Chegg Math, an adaptive math
technology and developer of the math application; Brand
Partnership, which offers various ways for student-relevant brands
to reach and engage high school and college students; Test Prep
that provides students with an online adaptive test preparation
services; and internships services. The company rents and sells
print textbooks and eTextbooks;
and offers supplemental materials and textbook buyback services.
The company has a strategic alliance with Ingram Content Group.
Chegg, Inc. was founded in 2003 and is headquartered in Santa
Clara, California. Sales growth has been relatively disappointing
although there is still a huge market opportunity for Chegg to
pursue.
$35.62
Market Cap $4.1
billion
PE N/A
Price to Sales
13.71 to 1
Bright Horizons
Family Solution
$116.76
Market Cap $6.78
billion
PE 43 to
1
Price to Sales
3.64 to 1
Grand Canyon
Education, Inc.
$92.42
Market Cap $4.45
billion
PE 20 to
1
Price to Sales
4.73 to 1
Risk
factors
Ambow
Education shares
many commonly encountered risk factors such as the inability to
raise capital, unexpected lawsuits, unfavorable international
political or economic events, and most likely the typical lengthy
CYA laundry list expected from any prudent company.
Conclusion
Based on multiple
current industry standard market comps, Ambow Education shares are
substantially undervalued at $6.30 per share and if they were
trading at industry average comps, they would be closer to $22.00
per share. Even more compelling is that Ambow growth is strongly positioned for
further dramatic gains as the company continues increasing growth
in China and is now entering the large U.S. education market with
an emphasis on providing skilled labor for the integrated circuit
and tech sectors. Ambow has good access to capital
since they were ushered into the U.S. financial markets through
an
IPO funded by Goldman Sachs, JP Morgan and others.
Higher
Ambow
share prices are
forecast in the near term as shares currently meets institutional
buying requirements and qualify for purchase by many institutional
investors. Small retail investors and small institutions currently
have an opportunity to accumulate Ambow shares at undervalued prices
before larger institutional buyers discover and drive up
price.
AMBO is
rated "Strong Buy" with 12-month target of $22.00
About
Emerging MicroCaps
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methods for valuation no longer work as well as in the past.
Technology and business are moving so quickly that many factors
must be considered for successful investment screening. Risks go
far beyond the typical risks associated with capital. The
underlying technology itself must be carefully analyzed to assess
its merits, how it will reach the market and how the market will
react to it, as well as how well management is capable of
execution. Intense research is required for every consideration and
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Contact/Source:
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