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  "docSlug": "0900eea60013",
  "documentTitle": "New Oriental Education & Technology Group (EDU)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2012-07-18 00:00:00",
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  "notes": "This is a page from a short-seller research report (Muddy Waters style).",
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      "kind": "callout",
      "text": "Because the evidence of hidden franchising and fraudulent financials is overwhelming, it is probable that EDU will restate historical earnings. It is also probable that EDU's auditor, Deloitte, will resign.",
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      "text": "net cash balance CAGR: 56.8%",
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      "kind": "paragraph",
      "text": "EDU has had an oddly symbiotic relationship with the other publicly-traded China education companies... with three of the four members reporting gross margins approaching 50%+.",
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      "text": "How large is EDU's franchise network? The fact that EDU is lying about whether it has franchises - a fundamental aspect of its business model - implies that franchising is a big problem for EDU.",
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      "text": "56.8% net cash balance CAGR.",
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      "text": "We see EDU's historical reported gross margin of over 60% as being far in excess of what is possible. Tier 1 cities generally top out at 30%, and in Tier 2-3 cities generally top out at 20%.",
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      "text": "EDU's financial statements for its Beijing operation are fraudulent because they show tax treatment that is impossible. EDU's 2011 audit fee was 32% lower than in 2007, despite having increased its (purported) store base by 195%.",
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      "text": "Converted to USD. Based on FY2011 audit fee and reported store count. CAST, whose former chairman effectively stole the company from shareholders, did not file a 2011 report.",
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