Good News on Listing | Frost & Sullivan Assists China's South China Vocational Education Group in Successful Hong Kong Listing (6913.HK)

China South China Vocational Education Group (hereinafter referred to as 'South China Vocational Education') successfully listed on July 13, 2021, with a global offering of 334 million shares, including 33.4 million shares sold in Hong Kong and 300 million shares sold internationally, along with an additional 15% over-allotment rights; based on the issue price of HK$1.59 per share, the net proceeds from the global offering are estimated to be approximately HK$45.7 million. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provides exclusive industry advisory services for the listing of South China Vocational Education, and we hereby extend our warm congratulations on its successful listing.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the company in completing feedback on various industry-related issues from the Hong Kong Stock Exchange, etc.

Vocational education in China is roughly divided into academic vocational education and non-academic vocational education. Academic vocational education includes higher vocational education (including vocational university education and junior college education) as well as secondary vocational education. Non-academic vocational education includes various types of training, and students will obtain completion certificates issued by institutions that may not be government-certified. The following diagram illustrates the composition of academic vocational education in China.

China's economy is developing rapidly, transforming its structure from a manufacturing-dependent economy to an increasingly service-oriented one driven by technology and services. This has created a huge demand for outstanding talents who have practical and vocational training and can quickly adapt to the working environment. The related trends have also brought stable growth to the vocational education industry. According to a Frost & Sullivan report, the total revenue of China's vocational education industry steadily increased from RMB 637.4 billion in 2015 to RMB 859.2 billion in 2019, with a compound annual growth rate of 7.8%. It is expected to increase to RMB 1,199.3 billion in 2024, with a compound annual growth rate of 6.9%. At the same time, the Greater Bay Area, as an important national initiative in China's long-term strategic development plan, has attracted top Chinese enterprises and rapidly developing companies, thereby boosting the demand for vocational education in the Greater Bay Area. This demand is showing steady growth, increasing from RMB 51.9 billion in 2015 to RMB 74.4 billion in 2019, with a compound annual growth rate of 9.4%, and is expected to further increase to RMB 106.4 billion by 2024, with a compound annual growth rate of 7.4% between 2019 and 2024.

The Chinese government has elevated private education and vocational training at the policy level. In 2019, the Ministry of Education issued the 'Draft Revision of the Vocational Education Law of the People's Republic of China (Draft for Soliciting Opinions)', emphasizing the importance of enterprises running vocational education and supporting a wide range of social entities to participate in vocational education. With the current trend of the Chinese government promoting private education and vocational training, according to Frost & Sullivan's report, the private education and vocational training industry in China has seen strong growth over the past five years, with total revenue increasing from RMB 28.6 billion in 2015 to RMB 462 billion in 2019, a compound annual growth rate of 12.7%. It is expected to reach RMB 776 billion by 2024, with a compound annual growth rate of 10.9%. At the same time, with strong economic growth, the demand for private education and vocational training in the Greater Bay Area has also steadily increased. According to Frost & Sullivan's report, the total revenue of private education and vocational training in the Greater Bay Area rose from RMB 4.6 billion in 2015 to RMB 6.5 billion in 2019, a compound annual growth rate of 9.2%, and is expected to further increase to RMB 10.3 billion by 2024, with a compound annual growth rate of 9.6%. According to Frost & Sullivan's report, there are about 140 private education and vocational training groups and institutions in the Greater Bay Area, with a total student population of 462,400.

With society increasingly recognizing vocational education and the government's promotion and development of academic vocational education, the demand for private academic vocational education institutions is constantly increasing, attracting students from non-academic vocational and public academic vocational education markets. According to a Frost & Sullivan report, the total revenue of non-academic vocational education in China is expected to increase from RMB 367.5 billion in 2019 to RMB 514.8 billion in 2024, with a compound annual growth rate of 7.0%. At the same time, in the Greater Bay Area, the non-academic vocational education market is expected to increase from RMB 30.3 billion in 2019 to RMB 43.8 billion in 2024, with a compound annual growth rate of 7.7%. The following chart illustrates the market size segmentation of the vocational education industry in China from 2015 to 2019 and from 2020 to 2024.

The following figure illustrates the market size segmentation of the vocational education industry in the Greater Bay Area during the forecast periods from 2015 to 2019 and from 2020 to 2024.

According to the Frost & Sullivan report, in recent years, the birth rate in Guangdong Province has remained at a relatively high level compared to China, and this trend is expected to continue. This is also conducive to the sustainable growth of demand in the private higher education vocational education industry, as it is anticipated that the future school-age population base in Guangdong Province will continue to grow. The birth rate in Guangdong Province increased from 11.12 per thousand in 2015 to 12.54 per thousand in 2019, and is expected to decline slightly to 12.29 per thousand in 2024. In contrast, China's birth rate has shown a downward trend, falling from 12.07 per thousand in 2015 to 10.48 per thousand in 2019, and is expected to further decline to 9.48 per thousand in 2024. The following chart illustrates the birth rates in China and Guangdong Province from 2015 to 2019 and from 2020 to 2024. The strong growth of the population in the Greater Bay Area and its relatively young demographic can contribute to the stable growth of the student population in the private higher education vocational education market. According to the Frost & Sullivan report, the number of students enrolled in private higher education vocational education in the Greater Bay Area is expected to increase from 462,400 in 2019 to 563,700 in 2024, with a compound annual growth rate of 4.0%.

Due to the strong increase in household income and demand for vocational education in the Greater Bay Area, the average annual tuition fees for private vocational education institutions in the region are higher than the average annual tuition fees in China, and this trend is expected to continue. According to a Frost & Sullivan report, the average annual tuition fees for private vocational education institutions in the Greater Bay Area were RMB 8,068 in 2019, higher than the RMB 4,909 in China that same year. By 2024, the average annual tuition fees for private vocational education institutions in the Greater Bay Area are expected to reach RMB 10,870, while those for private vocational education institutions in China are expected to be RMB 6,976. The relatively high average annual tuition fees for private vocational education in the Greater Bay Area reflect the higher household income in the region and generally higher initial employment rates for private vocational education institutions compared to other parts of China.

According to a Frost & Sullivan report, in 2019, the average tuition fee for private vocational universities in the Greater Bay Area was RMB 26,000, far higher than that for junior colleges and secondary vocational education (RMB 12,250 and RMB 4,100 respectively), reflecting that within China's private higher education vocational system, the higher the level of education involved, the higher the average annual tuition fees that educational service providers can charge, which is beneficial to the industry in the Greater Bay Area.

The following figure illustrates the average annual tuition fees for private vocational education in China and the Greater Bay Area during the forecast periods from 2015 to 2019 and from 2020 to 2024, as well as the average annual tuition fees for private vocational universities in the Greater Bay Area in 2019.

According to a Frost & Sullivan report, in 2019, the initial employment rates for tertiary education, secondary vocational education, and undergraduate education in the Greater Bay Area were all higher than the national average. In 2019, the initial employment rates for tertiary education, secondary vocational education, and undergraduate education in the Greater Bay Area were 96.1%, 98.1%, and 93.4% respectively, which are higher than the initial employment rates of 78.6%, 82.6%, and 77.9% for tertiary education, secondary vocational education, and undergraduate education in China in 2019. The high initial employment rates in the Greater Bay Area are driven by the strong economic vitality and growth of the Greater Bay Area of China, as well as its strategic role, which is conducive to the stable growth of demand for higher education and vocational education. The following chart illustrates the initial employment rates for vocational education and undergraduate education in China and the Greater Bay Area in 2019.

The private education vocational training market in China is highly fragmented. In the 2019/2020 academic year, there were over 2,500 private education vocational training groups in China. According to a Frost & Sullivan report, the five major private education vocational training groups in China accounted for approximately 5.5% of the total number of students enrolled in the private education vocational training market in 2019/2020.

We are the fifth-largest private vocational education group in China by the number of students enrolled, accounting for 0.5% of the market share during the 2019/2020 academic year. The table below lists the group's market position in the private vocational education market in China by the number of students enrolled for the 2019/2020 academic year.

According to data from the Ministry of Education, accounting for the number of students enrolled in the 2019/2020 academic year, vocational education with academic qualifications in China accounts for about 9.8% of the market share in the academic education industry.

In the 2019/2020 academic year, there were approximately 140 private degree vocational education groups in the Greater Bay Area. According to a Frost & Sullivan report, the five major private degree vocational education groups in the Greater Bay Area accounted for about 23.3% of the total number of students enrolled in the private degree vocational education market in the 2019/2020 academic year.

We are the largest private education vocational group in the Greater Bay Area by number of enrolled students, accounting for 5.8% of the market share in the 2019/2020 academic year. According to a Frost & Sullivan report, the private education vocational market in the Greater Bay Area accounts for about 8.7% of China's private education vocational market (based on 2019 revenues). In addition, according to a Frost & Sullivan report, based on the number of enrolled students in TMT industries and related majors in the Greater Bay Area for the 2019/2020 academic year, we are also the largest private education vocational group in the region. The table below lists the group's position in the private education vocational market in the Greater Bay Area by number of enrolled students for the 2019/2020 academic year.

The TMT industry and the big health industry in the Greater Bay Area are developing rapidly, leading to a significant talent gap and an increased demand for graduates majoring in related fields. In the 2019/2020 academic year, our TMT industry and big health industry-related majors accounted for 64.4% of the total student population, the highest proportion among all private vocational education groups in the Greater Bay Area for the same academic year. We focus on vocational education in these two emerging industries, ensuring that graduates have strong competitiveness in the job market and a high initial employment rate. In addition, compared to graduates from non-degree vocational education and degree non-vocational education, our graduates from associate degree, secondary vocational diploma, and higher vocational diploma programs (all degree vocational education) not only master practical skills that are readily available but also more systematic theoretical knowledge, possess government-recognized academic qualifications, and have more competitive advantages in the job market.

Frost & Sullivan has extensive research experience in the education industry and has assisted well-known enterprises in successfully listing on the capital market. Successful listings include YQ.NASDAQ (YQ Education Group), 9901.HK (New Oriental), LXEH.NASDAQ (Lixiang Education Group), IH.NYSE (Hongen Education Group), 1449.HK (Lide Education Group), 1981.HK (Huaxia Audio-Visual Education Group), 9986.HK (Dashan Education Group), CLEU.NASDAQ (Huaxia Boya Education Group), METX.NASDAQ (MELAN English Education Group), 1525.HK (Jianqiao Education Group), 1593.HK (Chenlin Education Group), 1756.HK (Huali University Group), DAO.NYSE (Youdao Education Group), 1871.HK (Xiang China International Education Group), 0382.HK (Zhonghui Education Group), 1769.HK (THINKLE Education Group), 1935.HK (Jiahong Education Group), 0667.HK (China Eastern Education Group), GSX.NYSE (Goon who learns Education Group), 1797.HK (New Oriental Online), 1890.HK (Kopei Education Group), 1851.HK (Ginkgo Education Group), 3978.HK (Excellence Education Group), 1969.HK (Chunlai Education Group), 1765.HK (Hope Education Group), 1758.HK (Bojun Education Group), 1773.HK (Tianli Education Group), NEW.NYSE (Puxin Education Group), 1598.HK (21st Century Education Group), 8105.HK (Huanggang Education Group), ONE.NYSE (Jingrui Education Group), 2779.HK (Xinhua Education Group), 0839.HK (Zhongjiao Education Holdings), FEDU.NYSE (Four Seasons Education Group), REDU.NASDAQ (Risi Subject English Education Group), BEDU.NYSE (Boshi Le Education Group), 2001.HK (New Higher Education Group), 1569.HK (Minsheng Education Group), 6169.HK (Yuhua Education Group), 6068.HK (Ruijian Education Group), COE.NYSE (51Talk Education Group), 1565.HK (Chengshi Foreign Language Education Group), 1317.HK (Maple Leaf Education Group), etc.