What triggered the rally: Bright Scholar Education Holdings Ltd-ADR (NYSE: BEDU) stock fell 2.21% after the company in the first quarter of FY 19 has reported the 39.7% rise in the revenue to RMB649.9 million. Adjusted gross profit for the quarter was RMB299.3 million, representing a 37.6% increase from RMB217.4 million in the same quarter of last fiscal year. Adjusted gross margin was 46.1% for the quarter as compared to 46.7% in the same period of last fiscal year. Adjusted operating income for the quarter was RMB191.4 million, representing a 39.0% increase from RMB137.7 million in the same quarter of last fiscal year. Adjusted operating margin was 29.5% for the quarter as compared to 29.6% in the same period of last fiscal year. Adjusted net income for the quarter was RMB167.5 million, representing a 39.9% increase from RMB119.8 million in the same period of last fiscal year. As of November 30, 2018, the Company’s cash and cash equivalents and restricted cash totaled RMB2,428.3 million (US$349.1 million), as compared to RMB3,164.1 million as of August 31,2018.
Rise in Expenses: Total selling, general and administrative expenses for the quarter grew by 51% to RMB121.6 million from RMB80.6 million in the same period of the last fiscal year. This accounts for 18.7% of total revenues as compared to 17.3% in the same period of last fiscal year. The selling, general and administrative expenses increased on the back of an increase in the compensation and benefits incurred from additional general and administrative staff members, employee stock ownership plan (“ESOP”) related expenses to prevent attrition of the employees, the rise in marketing expenses due to the company’s brand promotion; the costs associated with acquisitions and other professional services to underpin the growth of the business as a listed company as well as the additional SG&A expenses incurred from businesses acquired.
Positive Outlook: For the current fiscal year, Bright Scholar has reaffirmed its guidance for its average student enrollment to be between about 41,600 and 42,000, representing a year-over-year increase between 13 percent and 15 percent, and that the company’s revenue would range from 2.3 billion ($330 million) to 2.35 billion yuan ($338 million) representing an increase of between 34 percent and 37 percent from the year before. The Company also expects five new kindergartens openings for the 2019 fiscal year.