One of the many opportunities created by the concurrent growth in China’s population and international business influence is the market for professional and executive training. As more and more Chinese students graduate from colleges and universities and enter the workforce, the level of competition for existing career opportunities will continue to intensify. Gaining a competitive advantage in the world’s largest labor force, currently at 812.7 million, is becoming increasingly difficult. As a result, many of China’s business professionals are turning to graduate-level educational programs, vocational training, and soft skills training and seminars as a means of differentiating themselves from other potential job candidates.
Executive and professional training courses in particular have experienced great success in recent years. Because of low barriers to entry and high growth in demand, the market for executive training services in China is highly fragmented among thousands of competitors with no notable dominant players. According to a study by the China Investment & Industry Research Center, there are more than 70,000 training companies nationwide in 2009, of which more than 10,000 are located in Beijing and Shanghai, but very few of them have generated annual sales of RMB 10 million or more.
One promising young company that has distinguished itself by easily crossing the RMB 10 million threshold is China Executive Education Corp. (OTCBB: CECX), a China-based executive training company offering classes to Chinese entrepreneurs on marketing, sales, public speaking, leadership, business motivation and a variety of business management skills. Officially launched in April 2009, the company generated RMB 62.44 million ($9.14 million) in revenue for its first eight months of operation to the end of fiscal 2009 and experienced continuous growth in sales and customer base from month to month. Net income for the period was RMB 25.09 million ($3.31 million), putting net margin at an impressive 40%.
China Executive Education recently announced its financial results for the first quarter of fiscal 2010, which continued the consistent upward trend in earnings and revenue. Sales in 1Q10 were $4.45 million (RMB 30.4 million using March 31, 2010 exchange rate), and management disclosed its expectation that full-year fiscal 2010 revenue would fall between $20 million and $24 million, or roughly RMB 140 million to RMB 160 million, driven by strong demand for the firm’s core services.
Strict admission requirements for executive MBA programs at top Chinese universities and business schools have created market opportunities for China Executive Education, as potential students who have been denied admission are likely to turn to independent training providers as an alternative. According to The JLJ Group, a China-focused market research and consulting firm:
Practical skills training, especially oral English, managerial and other business-related soft skills, continue to be popular among the Chinese. This is driven partly by strong demand from companies seeking qualified and skilled managers, which are still scarce commodities in China’s labor market. Demand for practical skills training is also being driven by individuals seeking ways to improve their competitive advantage in the labor market.
Very positive industry and macro trends as well as the Company’s competitive advantage over its peers in size, international network, and broad service offerings are likely to sustain China Executive Education’s high growth in the near future. Such a high-growth, largely undiscovered stock certainly deserves investors’ attention as a potential stake in the future of China’s vocational training market.
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