HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a> are still yet to be fully reflected.</li>
<li>The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.</li>
<li>Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.</li>
</ul>


Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of China Education Group (839 HK) are still yet to be fully reflected.
The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.
Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.


China Education Group (839 HK): Further Evidences for Underlying Health

Hope Education Group Co Ltd / Equity Bottom-Up

<ul>
<li>Following share price plunge even with decent FY21 result, most of the risks for <a href="https://www.smartkarma.com/entities/hope-education-group-co-ltd" target="_blank" data-smartkarma-citation="entities:27321:1" rel="noopener">Hope Education Group (1765 HK)</a> have been released, but its return profile looks more interesting now.</li>
<li>We see bright spots including good cash flow, solid financial position, positive business outlook, new stock option scheme and limited regulatory exposure the key investment merits. </li>
<li>Valuations appear undemanding at 10.4x and 8.4x PERs for FY21 and FY22. They are at premium to <a href="https://www.smartkarma.com/entities/china-yuhua-education" target="_blank" data-smartkarma-citation="entities:23627:1" rel="noopener">China Yuhua Education (6169 HK)</a> but discount to <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a>. </li>
</ul>


Following share price plunge even with decent FY21 result, most of the risks for Hope Education Group (1765 HK) have been released, but its return profile looks more interesting now.
We see bright spots including good cash flow, solid financial position, positive business outlook, new stock option scheme and limited regulatory exposure the key investment merits. 
Valuations appear undemanding at 10.4x and 8.4x PERs for FY21 and FY22. They are at premium to China Yuhua Education (6169 HK) but discount to China Education Group (839 HK). 


Hope Education (1765 HK): Hopeful or Hopeless?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-yuhua-education" target="_blank" data-smartkarma-citation="entities:23627:1" rel="noopener">China Yuhua Education (6169 HK)</a> has significantly cleaned up its K-9 business by deconsolidated from FY21 result with a Rmb1.04bn one-off losses. Reported profit, however, still reached Rmb824.5m. </li>
<li>The continuing business achieved a profit of Rmb1.2bn, growing by an estimated 48% YoY, suggesting that the higher and vocational segment is operating on a sound basis. </li>
<li>It is in the process to transform three K-9 schools into higher vocational schools. Guidance for FY22 is not less than 20% earnings growth for the continuing business.  </li>
</ul>



China Yuhua Education (6169 HK) has significantly cleaned up its K-9 business by deconsolidated from FY21 result with a Rmb1.04bn one-off losses. Reported profit, however, still reached Rmb824.5m. 
The continuing business achieved a profit of Rmb1.2bn, growing by an estimated 48% YoY, suggesting that the higher and vocational segment is operating on a sound basis. 
It is in the process to transform three K-9 schools into higher vocational schools. Guidance for FY22 is not less than 20% earnings growth for the continuing business.  


China Yuhua Education (6169 HK): Cleaner After a Big Bath?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a> again announced solid result with adjusted net profit surged by 57.1% to Rmb1.55bn in FY21, ahead of guidance and also better than market expectations.</li>
<li>Management suggests positive FY22 outlook as student recruitment is encouraging, new schools and campuses add momentum and potential acquisitions provide upside. Unified new student enrollment increased 34% YoY.</li>
<li>CEG stays as our top pick in China Private Education Sector, and its PER of 14.5x for FY22F is undemanding given sustained solid earnings outlook and less regulatory exposure.</li>
</ul>



China Education Group (839 HK) again announced solid result with adjusted net profit surged by 57.1% to Rmb1.55bn in FY21, ahead of guidance and also better than market expectations.
Management suggests positive FY22 outlook as student recruitment is encouraging, new schools and campuses add momentum and potential acquisitions provide upside. Unified new student enrollment increased 34% YoY.
CEG stays as our top pick in China Private Education Sector, and its PER of 14.5x for FY22F is undemanding given sustained solid earnings outlook and less regulatory exposure.


China Education Group (839 HK): Post-FY21 Result Call Suggests Robust Year Ahead

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.

Quantitative Analysis

<ul>
<li>We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Nov 12 based on HKEx daily reports.</li>
<li>In the past 7 days, the top 3 companies that repurchased the most shares were China Medical System (867 HK), Sihuan (460 HK), China East Education (667 HK).</li>
<li>In the past 30 days, the top 3 companies that repurchased the most shares were China Gas (384 HK), Xiaomi (1810 HK), Sihuan (460 HK).</li>
</ul>


We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Nov 12 based on HKEx daily reports.
In the past 7 days, the top 3 companies that repurchased the most shares were China Medical System (867 HK), Sihuan (460 HK), China East Education (667 HK).
In the past 30 days, the top 3 companies that repurchased the most shares were China Gas (384 HK), Xiaomi (1810 HK), Sihuan (460 HK).


Hong Kong Buybacks: China Medical System, Sihuan, China East Edu

China

China East Education Holdings Limited provides vocational training educational services. The Company offers culinary education, internet technology education, automotive education, and other services. China East Education Holdings provides services in China.

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China East Education (667 HK)

China Education Group (839 HK): Further Evidences for Underlying Health

Solid growth in approved top-up degree quota brightens CEG's outlook. Even with share price spike, it still trades on cheap 7.1x PER for FY22, with...

Osbert Tang, CFA

Hope Education (1765 HK): Hopeful or Hopeless?

With a focus on higher education, Hope Education should see lesser regulatory risks. Good cash flow, solid financial position and positive business...

Osbert Tang, CFA

China Yuhua Education (6169 HK): Cleaner After a Big Bath?

A massive cleanup of K-9 segment should clear many uncertainties from the government's regulations. Focusing on higher and vocational colleges will...

Osbert Tang, CFA

China Education Group (839 HK): Post-FY21 Result Call Suggests Robust Year Ahead

After beating expectation in FY21 result, positive outlook will extend into FY22 as student recruitment is encouraging, new schools and campuses...

Osbert Tang, CFA

Hong Kong Buybacks: China Medical System, Sihuan, China East Edu

We highlight the top 3 companies that repurchased the most shares in HK were China Medical System (867 HK), Sihuan (460 HK), China East Education...

Ke Yan, CFA, FRM

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52-week Range

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