Bericht vom Shareholder meeting!!!
The HRCT meeting in SF started with some 15 shareholders in attendance.
It began with an introductory report by CEO Victor Zhou. He was very upbeat about Hartcourt prospects and soon turned the meeting over to Dr. Hu.
Dr. Hu laid out his business plan emphasizing a very active, centralized management plan.
He presented a slide show to accompany his executive summary, which described HRCT as a holding company for vocational education in China. He noted that as of 2005 there were 28 million students in Chinese vocational schools with the number rising to 52 million over the next 5 years.
HRCT's immediate goal was to acquire about 20 schools by 2008 and 50 by 2010. Revenues from 10 schools were forecast at $40 million, thus $200 million for 50. He described his numbers and estimates as conservative. Dr. Hu reiterated his goal of seeing a shareprice of .50 by the end of this year, but noted that his was a target and not a guarantee.
Dr. Hu noted the new HRCT 6-member Strategic Advisory Committee and planned to have them all meet in China in the near future.
He planned to expand his current Technical Expert Committee to 10 people. These people would oversee the educational structures at Hartcourt schools.
Dr. Hu considered that the current acquisitions of Yucai and China Princely were essentially done deals, with some bureaucratic formalities left to conclude. Numbers from this institutions will begin appearing in the next annual report.
Dr. Hu fielded questions throughout his presentation as well as at the end.
Q&A:
As to the mechanics of acquisitions, he outlined deals that would mix shares and cash, minimising use of current cash and locking distributed shares for at least one year.
As to the types of vocational schools under consideration, most were seen to be within 1-2 hours flying time of Shanghai. Each of these schools currently offered a broad mix of vocational training and he saw it as part of Hartcourt's plan to
steer them into more specialized categories.
As to marketing and acquisition he looked to offer incentives to teachers and to work with real estate developers to establish new educational centers.
As to revenue the schools would pay Hartcourt management fees as well as a percentage of their profits. A significant revenue stream potential was seen in the China Princely acquisition, because it is the only institution in China that has the right from the Ministry of Education to issue certification to teachers. Dr. Hu negotiated 100% ownership in China Princely.
As to competition there was some local competition, but HRCT appears to be in the leading position due to its early entry into this market. Privatization by the government was only approved in October 2005. Some comparisons were made with New Oriental, which Dr. Hu noted specialized in short term training programs, like for chefs, that lasted months rather than years.
As to a move to Nasdaq Dr. Hu hoped to get there in 2 years and that if necessary he would not rule out a reverse split to attain a requisite share price for the move.
I am sure that other shareholders who were present will be happy to add to the above summary.
I was very impressed with Dr. Hu's presentation, his diligence, his attentiona to detail, and his efforts to answer all questions as directly as possible. I remain a committed shareholder and look forward to the shareholder meeting next year in Hawaii.
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