IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

17 Education & Technology Grou / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/17-education-and-technology-group-inc" target="_blank" data-smartkarma-citation="entities:31033:1" rel="noopener">17 Education and Technology (YQ US)</a> is an online leading education technology company in China. It ranked fifth in online K-12 large-class after-school tutoring market as measured by gross billing and paid course enrolments in 2019 and 1H20, according to Frost &amp; Sullivan. 17 Education is backed by Shunwei Capital (20.2% shareholder), CITIC Securities (11.6%) and Temasek (11.2%). 17 Education aims to raise net proceeds of $265.2 million through a Nasdaq IPO. The COVID-19 pandemic has accelerated the acceptance of K-12 online after-school tutoring in China. This effect is also expected to extend into the post-pandemic period due to parents’ and students’ increased awareness of the efficiency and effectiveness of online after-school tutoring. However, Chinese online education, particularly K-12 tutoring, is at an early stage of development and greatly relies on large marketing budgets and low-price promotions to drive growth.<div class="content-highlight">Within this fierce competitive setting 17 Education cleverly differentiates through its razor-razorblade pricing model that offers offline in-school products free to cross-sell the lucrative online after-school products. Investing in this sector requires acceptance that the high upfront losses are a necessary evil which should generate returns through the lifetime value of K-12 students. For investors comfortable with this dynamic, we believe that 17 Education has attractive fundamentals. </div>

17 Education and Technology (YQ US) is an online leading education technology company in China. It ranked fifth in online K-12 large-class after-school tutoring market as measured by gross billing and paid course enrolments in 2019 and 1H20, according to Frost &amp; Sullivan. 17 Education is backed by Shunwei Capital (20.2% shareholder), CITIC Securities (11.6%) and Temasek (11.2%). 17 Education aims to raise net proceeds of $265.2 million through a Nasdaq IPO. The COVID-19 pandemic has accelerated the acceptance of K-12 online after-school tutoring in China. This effect is also expected to extend into the post-pandemic period due to parents’ and students’ increased awareness of the efficiency and effectiveness of online after-school tutoring. However, Chinese online education, particularly K-12 tutoring, is at an early stage of development and greatly relies on large marketing budgets and low-price promotions to drive growth.Within this fierce competitive setting 17 Education cleverly differentiates through its razor-razorblade pricing model that offers offline in-school products free to cross-sell the lucrative online after-school products. Investing in this sector requires acceptance that the high upfront losses are a necessary evil which should generate returns through the lifetime value of K-12 students. For investors comfortable with this dynamic, we believe that 17 Education has attractive fundamentals. 

17 Education & Technology IPO Initiation: Acquired Taste

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<a href="https://www.smartkarma.com/entities/17-education-and-technology-group-inc" target="_blank" data-smartkarma-citation="entities:31033:1" rel="noopener">17 Education and Technology (YQ US)</a>  is a leading education technology company in China with an “in-school + after-school” integrated model which provides offline and online K-12 education products and services in China. Online K-12 tutoring service accounted for more than 90% of the company’s revenues in 9M20.The company has filed for an IPO to list its shares in the US and has a placeholder indication to raise about US$100m. In this insight, we examine the company’s business model, its segments, revenues and margins.

17 Education and Technology (YQ US)  is a leading education technology company in China with an “in-school + after-school” integrated model which provides offline and online K-12 education products and services in China. Online K-12 tutoring service accounted for more than 90% of the company’s revenues in 9M20.The company has filed for an IPO to list its shares in the US and has a placeholder indication to raise about US$100m. In this insight, we examine the company’s business model, its segments, revenues and margins.

17 Education & Tech IPO: Another Online Education Provider with No Clear Path to Profitability

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

17 Education is a leading online tuition provider in China. The company was founded by former regional head of New Oriental Education and is looking to raise up to USD 300m via a listing in the US.17 Education has a unique business model whereby it provides a free in-school solution to teachers, students and parents and upsells after-school paid tuition. On one hand it has a large pool of verified students to upsell its paid after-school tuition. On the other hand its conversion and market share is low, relative to its addressable market.While a majority of the paid-enrollment came from the in-school pools of students, it still needs to spend the majority of its gross profit as the promotional course expenses. We think it is so far a hard business. Our preliminary assessment suggests that it could take the company until the end of 2022 to reach breakeven.The company had negative newsflow of administrative warning for its collection of personal data as well as unauthorized in-app purchases for homework related online games.

17 Education is a leading online tuition provider in China. The company was founded by former regional head of New Oriental Education and is looking to raise up to USD 300m via a listing in the US.17 Education has a unique business model whereby it provides a free in-school solution to teachers, students and parents and upsells after-school paid tuition. On one hand it has a large pool of verified students to upsell its paid after-school tuition. On the other hand its conversion and market share is low, relative to its addressable market.While a majority of the paid-enrollment came from the in-school pools of students, it still needs to spend the majority of its gross profit as the promotional course expenses. We think it is so far a hard business. Our preliminary assessment suggests that it could take the company until the end of 2022 to reach breakeven.The company had negative newsflow of administrative warning for its collection of personal data as well as unauthorized in-app purchases for homework related online games.

17 Edu & Tech (一起教育) Pre-IPO: Far from Profitability

Supun Walpola

New Oriental Education & Techn / Equity Capital Markets

<ul><li>
<a href="https://www.smartkarma.com/entities/new-oriental-education-tech-grp-adr" target="_blank" data-smartkarma-citation="entities:531:1" rel="noopener">New Oriental Education (EDU US)</a> (New Oriental) is the latest US-listed Chinese company to launch a secondary listing on the HKEX. </li></ul><ul>
<li>New Oriental’s HKEX offer will have two tranches; a Hong Kong offer and an international offer. The maximum offer price for the Hong Kong offer is set at HKD1,399 per share. New Oriental is expected to set the international offer price by November 3, 2020. The final Hong Kong offer price will be the lower of the international offer price and the maximum offer price above. </li>
<li>In this note, we take a quick look at New Oriental's fundamentals and the valuation ahead of its HKEX listing. </li>
</ul>


New Oriental Education (EDU US) (New Oriental) is the latest US-listed Chinese company to launch a secondary listing on the HKEX. 
New Oriental’s HKEX offer will have two tranches; a Hong Kong offer and an international offer. The maximum offer price for the Hong Kong offer is set at HKD1,399 per share. New Oriental is expected to set the international offer price by November 3, 2020. The final Hong Kong offer price will be the lower of the international offer price and the maximum offer price above. 
In this note, we take a quick look at New Oriental's fundamentals and the valuation ahead of its HKEX listing. 


New Oriental HKEX Listing: An Attractive Growth Profile but Expensive

<div class="content-highlight">
In our previous note, <a href="https://www.smartkarma.com/insights/ihuman-ipo-competition-is-likely-to-eat-into-profits" target="_blank" data-smartkarma-citation="insights:43574" rel="noopener">IHuman IPO: Competition Is Likely to Eat into Profits</a>, we suggested that, while we like iHuman for its robust medium-term growth profile, tight competition in the online edutainment market would prevent this strong growth from being reflected in the bottom-line, and we would only subscribe to the IPO as long as these weaknesses are compensated through the valuation. However, iHuman’s valuation looks expensive to us compared to its Chinese edutech peers, making the risk-reward nowhere near attractive.
</div>


In our previous note, IHuman IPO: Competition Is Likely to Eat into Profits, we suggested that, while we like iHuman for its robust medium-term growth profile, tight competition in the online edutainment market would prevent this strong growth from being reflected in the bottom-line, and we would only subscribe to the IPO as long as these weaknesses are compensated through the valuation. However, iHuman’s valuation looks expensive to us compared to its Chinese edutech peers, making the risk-reward nowhere near attractive.


China

East Buy Holding Limited operates livestreaming platform businesses. The Company provides private label products including agricultural products, food, books, and household goods. East Buy Holding also conducts college education businesses.

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East Buy Holding (1797 HK)

17 Education & Technology IPO Initiation: Acquired Taste

17 Education aims to raise net proceeds of $265.2 million through a Nasdaq IPO. In a fiercely competitive market, 17 Education has a unique...

Arun George

17 Education & Tech IPO: Another Online Education Provider with No Clear Path to Profitability

17 Education & Technology is a leading education technology company in China with an “in-school + after-school” integrated model which provides...

Shifara Samsudeen, ACMA, CGMA

17 Edu & Tech (一起教育) Pre-IPO: Far from Profitability

17 Education is a leading online tuition provider in China. The company was founded by former regional head of New Oriental Education and is...

Ke Yan, CFA, FRM

New Oriental HKEX Listing: An Attractive Growth Profile but Expensive

In this note, we take a quick look at New Oriental Education (EDU US)'s fundamentals and the valuation ahead of its HKEX listing.

Supun Walpola

IHuman IPO: Just Not Worth It

In our previous note, we suggested that, while we like iHuman for its robust medium-term growth profile, tight competition in the online...

Supun Walpola

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