HOW TO PLAY IT
Long before college, Chinese students begin a highstakes game for college admission. The leading Chinese K-12 afterschool tutoring companies, TAL Education Group and New Oriental Education & Technology Group, are benefiting from rising disposable income and market consolidation (especially since the top two brands still have under 5% aggregate market share). Some investors have feared new tighter regulations for afterschool tutoring in China. I believe these regulations will force out unlicensed providers to the benefit of leaders like TAL and New Oriental. Expect 50% growth in revenues for TAL and 30% at New Oriental over the next year. TAL is growing faster, but New Oriental has kept a tight focus on operating margins. Buy both.