Wah Fu Seeks a Place at the Top of the Continuing Education Heap

The company hopes going public with an initial public offering might be a first step toward a new role as a national power in continuing education.

Author: Ed Newton   

One of the mainstays of continuing education in eastern China has plans to step up as a national presence in the lucrative private education market, with a goal of offering services in all 24 of China's provinces as well as its provincial level metropolitan areas. 

Beijing-centered Wah Fu Education Group, a small but persistent program that now provides educational services in just 10 provinces, is hoping to go public with an initial public offering of between slightly less than $4 million and about $8.5 million. 

The underwriter for the IPO, Network 1 Financial Securities, is seeking to sell between 1 million and 2 million shares at about $5 per share on a "best efforts" basis, meaning the firm has no obligation to sell a specific number of shares or any specific dollar amount. The date of the IPO has not yet been set. 

If successful, Wah Fu's shares would be listed on the Nasdaq Stock Market under the symbol "WAFU." The company has been in operation under various names for 19 years. 

Wah Fu, which has roots dating back to 1999, has contracted with educational institutions, such as Jiangxi Normal University, Jiangxi University of Science and Technology, Fujian Education Institution, and Nanchang University, to provide teaching services and systems since it began. 

The company, formed originally as Beijing Distance Learning, has until now operated as a holding company whose subsidiaries offer a range of educational services. In 2012, the company reorganized under the laws of the British Virgin Islands, taking the name of Wah Fu Education Group Ltd. 

Among the holding company's properties are Beijing Digital Information, which is wholly controlled by Wah Fu. 

That and other holding arrangements allow the company to derive most or all of the economic interest from its held properties in China. 

Booming Market Potential

China's burgeoning middle-class has created a full-gale demand for education and tutorial services, and there are thousands of private companies ready to answer the call. But the sector is just beginning to consolidate, with the two giants in the field, TAL Education Group and New Oriental Education & Technology Group, each with millions of customers, controlling less than 5 percent of the market between them. 

Wah Fu is just beginning to make its mark in the field. 

Among the positive developments in recent years include being recognized by the China Research and Intelligence Co. as "the leading provider and standards setter of online education service [via] self-taught examination courses" in China. Wah Fu now offers over 700 online courses and provides services to more than 100 universities and colleges in the field. 

The company also launched an adult education platform less than two years ago, and so far 20 schools have signed service agreements with Wah Fu and 60 more are testing the services. 

Wah Fu is currently owned by board chairman and executive director Yang Yu, who has a 51.5 percent stake, and CEO Xinghui Yang, with 48.5 percent. After the IPO, Yu would own 31.7 percent of ordinary shares, and Yang, 29.8 percent. 

Under their leadership, Wah Fu has developed three platforms, employing a classic B2B2C business model. These are: a self-study examination platform, a continuing education platform and, for those seeking certification in job skills, a non-diploma training platform. Each is available online and via mobile applications that are designed to fit the needs of individual students. 

Ambitious Plans

The company plans to use the net proceeds of the IPO for "general corporate purposes." These range from sales and marketing, product development (that is, more online courses, training platforms and other educational products), research and development (particularly in digital information) and establishing new branches both in China and abroad. 

The company's national strategy rests on the demand for the kind of services Wah Fu provides from more than 3,000 universities in China.  

"Our vision is to utilize our technology advantages accumulated over our nearly two-decade operations to become the best education technology company in China," according to Wah Fu's prospectus filed with the Securities and Exchange Commission. 

The ambition is lofty, and the road to achieving it is long and hard. However, things may be looking up for Wah Fu. China Resarch and Intelligence lists the five top companies in China competing for a share of the same B2B2C market that Wah Fu operates in. 

The giant in the field is Beijing Huaxia Dadi Distance Learning Services Co., with revenue of almost $4.8 million and a 5.51 percent market share in 2016. Wah Fu's own "selected consolidated financial data," though, showed revenue n 2016 of $7 million (and $5.2 million in 2017), figures that are unacknowledged by official records. 

"With respect to companies using the B2B2C service model,‘ the prospectus said, "Beijing Distance Learning has a much higher market share than that of its competitors."