We are encouraged by ChinaEdu CEDU new business initiatives as they allow the company to diversify its revenue base from online degree services to other non-degree K-12 services businesses. Having said that, Deutsche Bank anticipates near-term operating margins to be compressed by higher investment spending associated with the new business roll-out. DB remain on the sidelines until it sees signs of margin improvement.
Deutsche Bank is encouraged by CEDU's new business initiatives discussed during the conference call, including continued learning center expansion, launch of international elite programmes, e-learning content platform, and personalized tutoring programs. The company will continue to invest in its online degree services business by adding 30+ learning centers on top of 97 centers as of December 31, 2010, with 25 being proprietary.
Deutsche Bank is lowering its 1Q11E revenue and GAAP EPS estimates from $14.1mil and $0.08, to $13.9mil and $0.01.
Deutsche Bank has a $7.50 PT (from $9) and Neutral rating
CEDU closed Tuesday at $7.48
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