NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.   Investor Relations Plan           AA Worldwide
ABOUT AA WORLDWIDE                Stakeholder                Engagement                Financial Communication           ...
New Oriental Educational & Technology Group Inc.[“New Oriental”]• Founded: 1993 by Michael Yu,who is also current CEO• Lar...
(SEC, New Oriental Prospectus, 2004)CLIENT OVERVIEW
External:The Securities and Exchange Commission, Dec.3, 2012“…today began administrative proceedings against the China aff...
Internal:New Oriental Education and Technology Group Inc., Yahoo!Finance, (Dec.6, 2012)Clarification on market activity: I...
STOCK PRICE
WeaknessStrengths                                 • Dilemma: High quality education V.S.• Most recognized private educatio...
• Increasing the diversity of shareholders• Financial communication trainings are needed for CEO  and other executives• Co...
INVESTOR RELATIONS PLAN        AA Worldwide
GOALS Create Fair Market Value For New Oriental To Make Sure Its  Current Stock Price Accurately Reflect The True Value O...
BENCHMARK Valuation benchmarks: value of New Oriental reflected in the stock market•   Market capitalization•   Operating...
ROI:MEASURING THE RETURNSImprove New Oriental’s Performance And Tarnished Reputation Most Direct Measure: Stock Price ($1...
Shareholder Base Analysis                                                        The Biggest                              ...
Shareholder Base AnalysisWho Is Tigerstep:• 100% owned by its president and CEO – Bamei Li• Bamei Li is Michael Yu‟s mothe...
Shareholder Base Analysis• In July 2012, New Oriental restructured its VIE     Beijing New Oriental Education & Technolog...
Shareholder Base Analysis• Public‟s Doubt:     Michael Yu still fully controls New Oriental?     Transparency?     Will...
Investor Peer Analysis• Identify fundamental and generalist investors who have a predilection to  buy the stock• Pre-quali...
ANNUAL REPORT1)   Advise in the development of the annual report‟s theme and content2)   Provide graphic designer and prod...
INVESTOR WEBSITE UPDATES            1) Convey a compelling investment proposition             Incorporate „why invest‟ se...
INVESTOR CONFERENCESUse investor chart/database (e.g. Thomson Reuters) totarget the appropriate investor conferencesFor ex...
INVESTOR DAY 2012 Shareholder        2013 Investors Day Meeting                         Meeting in Hong Meeting in Hong Ko...
INVESTOR DAY                                Sample Agenda   Morning Session   •Company Overview and Strategy – Michael Yu ...
ROADSHOW Continue to target new near-term buyers and conduct road show in top  investment cities (NYC, London, Boston, an...
CRISIS MANAGEMENTCrediblity          Transparency Dialogue Compile an extensive „play book‟ (a crisis plan) for every sce...
INTERNAL ENGAGEMENT    Emphasize on engagement of China management team    Assist on quarterly board report and valuatio...
TIMELINE Investor Day Investor-approaching Event Proposed Non-deal Roadshow  Proposed Report  Release Day                 ...
STAFFING Carole      Gracie     Yingling    Oujia Wang Jason Xia Zhou        Zheng       JiangManaging    Managing    Mana...
BUDGETIndustry/peer Group Analysis           $20,000Quarterly Earnings, Annual Report     $150,000Investor Website Updates...
QUESTIONS & COMMETS?    THANK YOU!       AA Worldwide
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New Oriental Investor Relations Plan

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Final Project Presentation for Financial Communication Class (JOUR 599).

Contents belong to team work while the PowerPoint was assembled by Carole.

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New Oriental Investor Relations Plan

  1. 1. NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC. Investor Relations Plan AA Worldwide
  2. 2. ABOUT AA WORLDWIDE Stakeholder Engagement  Financial Communication  Internal Communication Global Business  International Markets ConsultingCommunication Strategy  Corporate Advisory & Market Entry North  Executive & Board Communication America  Branding & Positioning East Asia  Business Solutions
  3. 3. New Oriental Educational & Technology Group Inc.[“New Oriental”]• Founded: 1993 by Michael Yu,who is also current CEO• Largest provider of private educational services in China• Primarily of English and other foreign language trainings, test preparations and primary & secondary school educations.• 2.4 Million enrollments in fiscal year 2012• IPO: September 7th, 2006• NYSE: EDU• IPO Price: $15 CLIENT OVERVIEW
  4. 4. (SEC, New Oriental Prospectus, 2004)CLIENT OVERVIEW
  5. 5. External:The Securities and Exchange Commission, Dec.3, 2012“…today began administrative proceedings against the China affiliates of each of the Big Four accounting firms andanother large U.S. accounting firm for refusing to produce audit work papers and other documents related to China-based companies under investigation by the SEC for potential accounting fraud against U.S. investors.”Carson Block, Founder and Research Director of Muddy Waters LLC. “New Oriental inflated its cash balances to gain approval from its auditors”.(July, 2012)“I lost interest in betting against Chinese stocks and speculated that the government is protecting fraudulent companiesin an interview” –on Bloomberg Television (Nov.27, 2012)Reshma Kapadia, Emerging Markets Columnist and Blogger, Barron‟s (Oct.31, 2012)“China‟s New Oriental Education‟s (EDU) fiscal first quarter sales missed the company‟s previous guidance and its profitmissed some analysts‟ expectations as margins disappointed due to the private education firm‟s continued expansion.The stock, which is down 6% in morning trading, has been hit in recent months by an SEC probe over its accountingand allegations by short seller Muddy Waters.”Jin Yoon, Analyst, Nomura“After aggressive expansion into lower-tier cities, the company now plans to shift its focus to raise the utilization rate ofexisting learning centers, which we think should benefit the bottom line in the medium to long term.”Ella Ji, Analyst at Oppenheimer & Co., New York. (Nov.29, 2012)“It would be a very big relief for New Oriental investors to see Muddy Waters getting out of China. A big overhang justremoved itself. This shows that very likely Muddy Waters doesn‟t really have any more evidence.”New Oriental Education & Technology Group surged 20 percent in November, the best performance in three months.The company‟s American depositary receipts (ADRs) climbed to a four-month high of $20.96 on Nov. 29. CURRENT LANDSCAPE
  6. 6. Internal:New Oriental Education and Technology Group Inc., Yahoo!Finance, (Dec.6, 2012)Clarification on market activity: In view of the continued market activity in the cos ADS, EDU would like to clarify that eventhough the cos independent auditor is Deloitte Touche Tohmatsu CPA, the co is not the Deloitte Touche Tohmatsu clientreferred to by the U.S. Securities and Exchange Commission in its proceedings initiated against the five accounting firms inChina.New Oriental Education and Technology Group Inc., PRNewswire, (Sep.30, 2012)“…the „Special Committee‟ has completed its review of certain allegations raised in a report issued by Muddy Waters on July18, 2012 and has found no significant evidence to support these allegations.”Michael Yu, New Oriental‟s Chairman and Chief Executive Officer (Oct.29, 2012)“We are pleased to start our 2013 fiscal year with continued steady top-line growth, driven by our tremendous growth beyondtier-one cities. Revenue from these cities grew an impressive 35% as we were able to ramp up utilization quickly andefficiently. The rapid expansion of our learning-center network, however, had a negative impact on the bottom line, which wasexacerbated by the weak performance of our Beijing and Shanghai schools and substantial expenses and diversion ofmanagement attention as a result of the SEC investigation and Muddy Waters‟ unfounded allegations against us.”“We feel exonerated and vindicated by the findings of the Special Committee refuting and discrediting Muddy Waters‟allegations. We hope to put this matter behind us and focus on running our business and improving the profitability of ouroperations through increasing learning center utilization and strict headcount and expense controls.”Louis Hsieh, New Oriental‟s President and Chief Financial Officer (Oct.29, 2012)“We are pleased to see continued strong growth across our key business lines, with revenue from both our overseas testpreparation programs and K-12 all-subjects after-school tutoring programs growing over 30% this quarter. Our VisionOverseas Study Consulting business also continued to outperform, with year-over-year gross revenue growth ofapproximately 55% in the quarter.” CURRENT LANDSCAPE
  7. 7. STOCK PRICE
  8. 8. WeaknessStrengths • Dilemma: High quality education V.S.• Most recognized private education Revenue/Stakeholders. brand in China • Lack of shareholders‟ diversity• Impressive increase on profits • CEO‟s negative comments about New brought by lower-tier city expansion Oriental‟s IPO• Variety of programs and the steady • Higher expectation of employees growing students enrollment • Lack of effective communications with U.S. market Threats:Opportunities: • SEC sued Big 4 China Office• No substantiating evidence to • Seven companies have filed the lawsuits against support the allegation against New Oriental New Oriental found • Differentiations on the market environments.• Carson Block‟s retreatment • North America‟s sensitivity on the VIE • Lack active public appearances of the executive bolstered EDU‟s stock people of New Oriental.• Upgraded by Ella Ji, Analyst from • Competitors with smaller scale and more Oppenheimer specific target audiences SWOT ANALYSIS
  9. 9. • Increasing the diversity of shareholders• Financial communication trainings are needed for CEO and other executives• Conducting more proactive outreaches to U.S. analysts and well-known financial media• Dealing with lawsuits appropriately and keeping communications with shareholders.• Stay consistent with U.S. financial market regulations and be cooperated with SECs investigation STRATEGIC
  10. 10. INVESTOR RELATIONS PLAN AA Worldwide
  11. 11. GOALS Create Fair Market Value For New Oriental To Make Sure Its Current Stock Price Accurately Reflect The True Value Of The Company. [Stock Price]= [Performance] + [Perception] Performance Variables: Perception Variables: • Revenue growth • Management credibility • Earnings growth • Corporate reputation • Return on investment • Customer loyalty • Cash flow • Brand image • Balance sheet strength • Employee commitment • Dividend yield • Liquidity
  12. 12. BENCHMARK Valuation benchmarks: value of New Oriental reflected in the stock market• Market capitalization• Operating profit margin• Forecasted long-term growth rate• Cost of capital• Liquidity benchmarks: liquidity for New Oriental‟s shares Liquidity benchmarks: Liquidity for New Oriental’s shares The ability to covert asset to cash quickly• Average daily trading volume• Spread or point differential between the bid and ask price• New Oriental‟s volume and spread compared to other companies with similar market capitalization and similar number of shares
  13. 13. ROI:MEASURING THE RETURNSImprove New Oriental’s Performance And Tarnished Reputation Most Direct Measure: Stock Price ($17.28) Other Measures:• Interviews: Mainstream media, buy side, sell side, industryanalysts, portfolio managers• Perceptions of company’s strategies and management team• Measures what management is communicating & how it’s received• Analyze and report the client’s feedback.
  14. 14. Shareholder Base Analysis The Biggest Shareholder Share Ownership Status by Sept. 2012 From New Oriental Annual Report INVESTOR RESEARC
  15. 15. Shareholder Base AnalysisWho Is Tigerstep:• 100% owned by its president and CEO – Bamei Li• Bamei Li is Michael Yu‟s mother, a traditional Chinese housewife INVESTOR RESEARC
  16. 16. Shareholder Base Analysis• In July 2012, New Oriental restructured its VIE  Beijing New Oriental Education & Technology Co. Ltd• Michael Yu purchased shares from 10 former shareholders• He 100% owned the VIE• He said it‟s because these shareholders no longer worked in New OrientalSEC investigated the VIE, and New Oriental’s stockprice dropped 35%VIE Concern on Chinese Corporation:Jack(Yun) Ma and Alibaba INVESTOR RESEARC
  17. 17. Shareholder Base Analysis• Public‟s Doubt:  Michael Yu still fully controls New Oriental?  Transparency?  Will New Oriental plan to go private as many former oversea-listed Chinese firms did? To resolve all these doubts and gain the street’s confidence, it’s important for New Oriental to seek more diverse investors and take more proactive communications with stakeholders INVESTOR RESEARC
  18. 18. Investor Peer Analysis• Identify fundamental and generalist investors who have a predilection to buy the stock• Pre-qualify firms to identify the most appropriate investor• Its peers: Ambow Education (AMBO), Tal Education Group (XRS), Xueda Education Group (XUE), and ChinaCast (CAST) INVESTOR RESEARC
  19. 19. ANNUAL REPORT1) Advise in the development of the annual report‟s theme and content2) Provide graphic designer and production vendor recommendations3) Make sure the report is appropriately converted for the website4) Draft the shareholders‟ letter and work with the company‟s internal resources on any narrative that accompanies the letter.QUARTERLY EARNINGS1) Assist on quarterly earnings release and script2) Work on pre-earnings key-messages document REPORTING
  20. 20. INVESTOR WEBSITE UPDATES 1) Convey a compelling investment proposition  Incorporate „why invest‟ section to IR website  Detail background and context in current „corporate profile‟ section  Provide „Objectives‟, „Mission Statement‟ and „Strategy‟ section. 2) Provide content in formats that engage investors  Make reports available in a variety of formats  Use image, charts, graphs and scorecards to visualize the company‟s performance  Aids to Sort and Search Information- e.g. selector 3) Be accessible and offer multiple ways to stay connected  Improve „Contact Us‟ pages INVESTOR TARGETING
  21. 21. INVESTOR CONFERENCESUse investor chart/database (e.g. Thomson Reuters) totarget the appropriate investor conferencesFor example:• Smid Cap Conference, J.P. Morgan, New York• Credit Suisse Annual Small & Mid Cap Conference, New York INVESTOR TARGETING
  22. 22. INVESTOR DAY 2012 Shareholder 2013 Investors Day Meeting Meeting in Hong Meeting in Hong Kong Kong; Hosting Webcast/Podcast meeting Open forum to discuss company affairs Various sessions INVESTOR TARGETING
  23. 23. INVESTOR DAY Sample Agenda Morning Session •Company Overview and Strategy – Michael Yu (CEO) •Financial Overview – Louis Hsieh (CFO) •Innovation and Future – Chenggang Zhou (Sr. EVP) •Question & Answer Afternoon Session •Open Forum •Key Message and Closing – Xiaodong Chen (Sr. EP) # Date: Nov. 2013 ( New Oriental usually publicize its Annual Report in Oct.) # Hand out Agenda and Investor Kit (Including Fact-sheet / Annual Report / Q1 2013 Earnings Release) beforehand INVESTOR TARGETING
  24. 24. ROADSHOW Continue to target new near-term buyers and conduct road show in top investment cities (NYC, London, Boston, and San Francisco) following the quarterly results. Continue to target long-term investors and hold company visits outside of the reporting season Leverage and arrange management‟s travel schedule to accommodate one on one meetings with pre-qualified investor targets Conduct new research prior to every roadshow. Email meeting participants presentation at least 24 hours prior to the meeting Gather feedback from investors. INVESTOR TARGETING
  25. 25. CRISIS MANAGEMENTCrediblity Transparency Dialogue Compile an extensive „play book‟ (a crisis plan) for every scenario- clarify what constitutes a crisis, identify the key people who can be given authority from the top level to deal with crisis, and establish what their roles are in a crisis. Continually examine and update their crisis plan to ensure all stakeholders have been addressed and that an efficient and actionable chain of command is in place(During the crisis) Assist on presentation and media training Incorporate social media platforms in Crisis preparedness plans to maintain control of the corporate message during a crisis and minimize wide-spread negativity. INVESTOR TARGETING
  26. 26. INTERNAL ENGAGEMENT  Emphasize on engagement of China management team  Assist on quarterly board report and valuation analytics  Provide specific advice on a given corporate action  Train and support to in house IR staff INVESTOR TARGETING
  27. 27. TIMELINE Investor Day Investor-approaching Event Proposed Non-deal Roadshow Proposed Report Release Day TIMELINE
  28. 28. STAFFING Carole Gracie Yingling Oujia Wang Jason Xia Zhou Zheng JiangManaging Managing Managing Senior Vice Vice Director Director Director President President STAFFING
  29. 29. BUDGETIndustry/peer Group Analysis $20,000Quarterly Earnings, Annual Report $150,000Investor Website Updates $5,000Approach Investors Conference $30,000*Investor Day $50,000Investor Targeting $30,000Non-deal Roadshows $80,000*Crisis Preparation $10,000Internal Engagement $8,000Press Release $25,000Social Media $2,000Total: $410,000 *flight fare is not included BUDGET
  30. 30. QUESTIONS & COMMETS? THANK YOU! AA Worldwide

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