Analyzing four small-cap opportunities appearing amid the regulatory storm.


In May 2021, a public company in China valued at CNY 3 billion was rejected by the investors for a roadshow, because it is considered a small-cap share with limited liquidity. This fired up the capital market in China and brought the topic to debate again: should we treat a company solely based on market capitalization?

We think it is rather irrational to determine the long-term value of a company based on its current market cap. In this article, we will analyze four Chinese small-cap companies with outstanding capabilities and future prospects.

Hailiang Education (HLG:NASDAQ)

Hailiang Education is one of the largest educational service providers for primary, middle and high schools in China. By the end of March 31, the company had 41 schools in its network, of which 13 were owned or sponsored and 28 were under full management.

With the strategy of deploying in both domestic and international education, Hailiang Education has a continuously growing student scale and improving educational outcomes, which serve as its main engine to lead China's education sector. Among the most popular players in the K12 private school sector in China, Hailiang Education has been generating the highest revenue for its investors.

In the past years, Hailiang Education has been actively acquiring and cooperating with more private schools both domestically and globally to expand its network. K12 Education is critical for China which has set education development as a strategic priority. Therefore, the future market is expected to be substantial for Hailiang Education. What is more, the state has lately restricted off-campus educational training courses. This move will effectively shift many domestic educational companies into a non-profit model. Under these circumstances, Hailiang Education, a private school operator, is expected to benefit hugely.

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