(NBD) Sept. 7 -- RYB Children Education Technology Development Co., Ltd. has submitted its IPO application document to the U.S. Securities and Exchange Commission.

The Beijing-based company plans to get listed on the New York Stock Exchange, aiming to raise no more than 100 million U.S. dollars. Credit Suisse and Morgan Stanley have been chosen as underwriters for the company's IPO.

According to the document, as of the first half of 2017, RYB Children Education has opened 80 directly-run kindergartens and 175 franchised ones across China, and has registered more than 20,000 students.

Data shows that the company's revenue was 65.06 million U.S. dollars in 2014, 82.89 million U.S. dollars in 2015, and 109 million U.S. dollars in 2016. The company didn't make a profit until 2016, and its profits were not huge as compared to its revenue.

This to some extent refutes a generally acknowledged fact that kindergartens are all lucrative though it is undeniable that kindergarten tuitions have been on the rise in recent years, with some reaching sky-high levels.

In the first half of 2017, RYB Children Education registered net profits of 4.95 million U.S. dollars on revenue of 64.34 million U.S. dollars, with more than 70 percent of its revenue coming from tuitions.

It is the asset-heavy business model that lowers the education institution's profits. In comparison, Vtron Group Co., Ltd. achieved a gross margin of 57.96 percent in 2016, while Guangzhou Weicai Science Education Technology Development Co., Ltd. saw 46.8 percent of its revenue come from franchising fee and brand royalties. Both companies rely much on asset-light operations.

In addition to risks arising from the business model, RYB Children Education also listed qualification and policy risks in the IPO application document.

With regard to qualification risks, it pointed out its problem of operation beyond scope. In policy terms, the Non-State Education Promotion Law of China took effect on September 1, 2017. This will add to uncertainties facing the company as the regulation requires private schools separate the profitable businesses from non-profit ones.  

Email: lansuying@nbd.com.cn