Chinese tutoring firms could spin off units, boost non-academic offerings

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Battered by a regulatory crackdown, China’s multi-billion-dollar private tutoring sector could seek to separate its business segments and bulk up non-academic tutoring as it tries to soften the blow on its operations, analysts said on Monday.

Shares in Hong Kong and U.S.-listed education firms such as New Oriental Education & Technology Group, TAL Education Group and Gaotu Techedu fell sharply for the second straight session on Monday after China barred for-profit tutoring in core school subjects.

While the firms said they expected the new rules to have a material impact on their after-school tutoring services, some analysts expect some of the largest education providers to take steps to mitigate the impact on their businesses.

Tutoring companies likely have to dispose of K-9 academic tutoring businesses,” China Renaissance Securities analyst Don Lau said in a note.

Mark Haefele, chief investment officer at UBS Global Wealth Management, noted that implementation of previous regulations has “often not taken the strictest form” and said listed after-school tutoring firms may look to spin off their school curriculum-based businesses and focus on other areas to avoid delisting.

Under the new rules, all institutions offering tutoring on the school curriculum will be registered as non-profit organisations, according to an official document.

China’s education industry sub-index plunged as much as 15% from Thursday’s close.

Morningstar Equity Research said in a report that it believed “both New Oriental and TAL would need to adjust their K-12 academic businesses and likely spin-off the non-profit mandatory education businesses in the longer term – while keeping high schools and other business such as overseas test preparation, adult English, and general English.”

It expects both providers to invest in non-academic tutoring such as art, computer coding, sport, music, and other extracurricular programs to keep their companies remain listed.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.