Piper Jaffray Maintains Overweight on New Oriental Education during SEC Investigation

Piper Jaffray has published a research report on New Oriental Education EDU and commented on the company's weak 4Q earnings and SEC investigation. In the report, Piper Jaffray wrote, "New Oriental reported its seasonally weak 4Q12 (May) with revenue better than Street expectations, while GAAP EPS missed by a penny on higher operating expenses due to the company's continued rapid learning center expansion. While 1Q13 (Aug) revenue guidance bracketed expectations, FY13 GAAP net income guidance of 22%-25% y/y was well below our 32% y/y expectation amid slowing growth in Beijing and Shanghai (37% of revenue), continued rapid learning center expansion, and expected lack of RMB currency translation benefit." On the SEC investigation, Piper Jaffray wrote, "New Oriental announced the SEC issued a formal investigation concerning "whether there is a sufficient basis for the consolidation of Beijing New Oriental Education & Technology (Group) Co., Ltd., a VIE of the company, and its wholly owned subsidiaries, into the company's consolidated financial statements. No additional information concerning the SEC investigation was disclosed by the company." Piper Jaffray maintained its Overweight rating and $37 price target on New Oriental Education, which is trading down 28 percent from yesterday's $22.26 closing price.