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Acquisition to be Major Catalyst for Revenue Increase
Greater Capacity Provides Growth Potential Correction - The following is a correction to the update published on 2/1/12. China Bilingual Technology and Education Group, Inc. (“CBLY” or the “Company”), an educational company which owns and operates K-12 private schools in Shanxi and Sichuan Provinces of PRC (People’s Republic of China), reported its first quarter results on January, 2012. Revenue for the first quarter increased 74.0% year-over-year to $10.4 million as Shanxi South School increased the total enrollment by 4,020 students from approximately 9,200 students to 13,220 students for the current school year. Net income decreased 76.1% year-over-year to $0.65 million, which was due to increases in interest, depreciation and amortization expenses associated with Shanxi South School (newly acquired school) and overhead costs associated with all three schools’ operations. EPS decreased by $0.07 from $0.09 to $0.02. Continued in research update....

Rating: Strong Buy
Target Price: $5.00
Recent Price: $0.83

Access 1Q12 Research Update

Strong cash position with favorable conditions for future expansion.
The Company’s liquidity and solvency position appears solid, as the Company had cash and cash equivalents of $9.0 million as of November 30, 2011. CBLY enjoys high cash flow with limited exposure to cash collection risk due to the prepayment model whereby course tuition fees are collected in advance and revenue recognized after services are provided; the Company has no accounts receivable. As prepayment of tuition fees for
future years comes with a discount, a significant portion of the Company’s customer base opts to prepay tuition fees a year or more in advance. In addition, a clause which nullifies refunds on repaid fees after the first three months of a school year discourages student withdrawals and guarantees a lower rate of attrition.

Trading at an attractive valuation.
CBLY shares currently trade at a P/E (ttm) of 2.3x which is significantly lower than the median P/E (ttm) of 15.8x for its publicly listed peers. Given the positive trends in China’s education industry, strong growth in enrollment rates expected for the Company in 2012 and 2013, and high margins enjoyed by the Company. We believe that a major discount to the broad market averages is unwarranted. Continued in research update...