Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

Equity Bottom-Up

China Maple Leaf Educational Systems / Equity Bottom-Up

<ul>
<li>The share of Maple Leaf has been sold off following the FY2020 results;</li>
<li>We find little (if any) evidence pointing to the permanent deterioration of business economics, and therefore, would like to maintain our positive long-term stance as described in our previous Insight;</li>
<li>The company has an ambitious medium-term target, which may lead to surprises on the upside over time.</li>
</ul>


The share of Maple Leaf has been sold off following the FY2020 results;
We find little (if any) evidence pointing to the permanent deterioration of business economics, and therefore, would like to maintain our positive long-term stance as described in our previous Insight;
The company has an ambitious medium-term target, which may lead to surprises on the upside over time.


Maple Leaf Educational Systems: Our Takeaways From FY2020 Results

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

<a href="https://www.smartkarma.com/entities/edvantage-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:28114:1" rel="noopener">Edvantage Group (382 HK)</a> is a play on private higher education in China with a presence in the Greater Bay Area. At a market capitalization of roughly 800 mn USD, this company is a good fit for funds that invest in mid-caps. With a recent capacity expansion by 46%, we see a clear roadmap for increasing enrollments by 8-10% over four years. In addition to this, we believe that tuition fees can sustainably increase by 5-7% CAGR  for the next 3-4 years due to reasonable placement rates in their colleges and strengthening brand recognition.
<h3>The investment thesis here is :</h3>
<ul>
<li>
The stock is inexpensive and can re-rate as the execution drives more conviction: We believe the valuation is cheap at 15x FY21/12xFY22  P-E(x) and 23% CAGR revenue growth, predicated on enrolments increasing by 12% CAGR as well as tuition fees increasing by 7-8% CAGR over the next 3-4 years.</li>
<li>
The additional upside from costs declining: Education costs account for 15% of sales. A majority of the cost ~76 mn RMB for FY20 (or 13% of the tuition fee of Huanshang College) is an annual licensing fee paid to Guangdong University of Finance and Economics (GUFE), for co-branding with a renowned public university in the region. However, new MoJ Draft regulations require the university to become independent by 2022.  The Group intends to become independent by 2021. If this happens, the education cost will go down to 0 from 76 mn RMB in a phased manner over 3-4 years. We do not factor this into our future estimates. </li>
<li>
Strong cash position to pursue further growth: The company has a net cash position of 520 mn RMB.  With Capex plans of 800 mn RMB for its new campus, we believe the company can easily expand its balance sheet and internal accruals.</li>
</ul>
We see this stock easily rerate to a 20x multiple based on its ability to execute and trade higher at 9-10 HKD/share, fuelled by these catalysts.
<h3>Risks </h3>
<ul>
<li>
Regulations on Fees:  Tuition fees charged by PRC Operating Schools are generally subject to China's relevant government pricing authorities' approval. However, in recent years, PRC government authorities have gradually loosened controls over tuition fees and boarding fees. </li>
<li>
Disappointing M&amp;A: The company overpaying for assets would be negative for the share price.
</li>
<li>
Execution: Given the company recently IPOed, its track record is short.  How the new campus ramps up will be the key to the thesis.  Any stumbles will be bad for the share price.</li>
</ul>

Edvantage Group (382 HK) is a play on private higher education in China with a presence in the Greater Bay Area. At a market capitalization of roughly 800 mn USD, this company is a good fit for funds that invest in mid-caps. With a recent capacity expansion by 46%, we see a clear roadmap for increasing enrollments by 8-10% over four years. In addition to this, we believe that tuition fees can sustainably increase by 5-7% CAGR  for the next 3-4 years due to reasonable placement rates in their colleges and strengthening brand recognition.
The investment thesis here is :


The stock is inexpensive and can re-rate as the execution drives more conviction: We believe the valuation is cheap at 15x FY21/12xFY22  P-E(x) and 23% CAGR revenue growth, predicated on enrolments increasing by 12% CAGR as well as tuition fees increasing by 7-8% CAGR over the next 3-4 years.

The additional upside from costs declining: Education costs account for 15% of sales. A majority of the cost ~76 mn RMB for FY20 (or 13% of the tuition fee of Huanshang College) is an annual licensing fee paid to Guangdong University of Finance and Economics (GUFE), for co-branding with a renowned public university in the region. However, new MoJ Draft regulations require the university to become independent by 2022.  The Group intends to become independent by 2021. If this happens, the education cost will go down to 0 from 76 mn RMB in a phased manner over 3-4 years. We do not factor this into our future estimates. 

Strong cash position to pursue further growth: The company has a net cash position of 520 mn RMB.  With Capex plans of 800 mn RMB for its new campus, we believe the company can easily expand its balance sheet and internal accruals.

We see this stock easily rerate to a 20x multiple based on its ability to execute and trade higher at 9-10 HKD/share, fuelled by these catalysts.
Risks 


Regulations on Fees:  Tuition fees charged by PRC Operating Schools are generally subject to China's relevant government pricing authorities' approval. However, in recent years, PRC government authorities have gradually loosened controls over tuition fees and boarding fees. 

Disappointing M&amp;A: The company overpaying for assets would be negative for the share price.


Execution: Given the company recently IPOed, its track record is short.  How the new campus ramps up will be the key to the thesis.  Any stumbles will be bad for the share price.


Edvantage Group: Executing in a Tough Environment

<ul class="">
<li>Maple Leaf Educational Systems caught our attention for its low price multiples and consistently decent returns on capital;</li>
<li>Both the financial track record and the current valuation look favorable, especially compared to peers.</li>
<li>We examine the business fundamentals with our proprietary framework in search of any value trap.</li>
</ul>


Maple Leaf Educational Systems caught our attention for its low price multiples and consistently decent returns on capital;
Both the financial track record and the current valuation look favorable, especially compared to peers.
We examine the business fundamentals with our proprietary framework in search of any value trap.


Maple Leaf Educational Systems: Deep Value or Value Trap?

APAC IPOs & Placements

Zhen Zhou, Toh

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.

Equity Capital Markets

China Education Group / Equity Capital Markets

<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> is looking to raise about US$216m in its top-up placement with an upsize option of 25m shares. In this note, we will look at the use of proceeds, deal dynamics, and run the deal through framework.

China Education Group (839 HK) is looking to raise about US$216m in its top-up placement with an upsize option of 25m shares. In this note, we will look at the use of proceeds, deal dynamics, and run the deal through framework.

China Education Group (中国教育集团) Placement - Likely Expected After Acquisition Announcement

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

China Distance Education Holdings Ltd (ADR) / Event-Driven

China Distance Education Holdings Ltd (ADR)

On 8th June, the top shareholders of <a href="https://www.smartkarma.com/entities/china-distance-education-hldgs-ltd-adr" target="_blank" data-smartkarma-citation="entities:9679:1" rel="noopener">China Distance Education Hldgs Ltd (Adr) (DL US)</a>, Mr.Zhengdong Zhu and his spouse Ms. Baohong Yin, made a "<a href="http://ir.cdeledu.com/news_en/PressReleases_en/li2006087242.shtml" target="_blank" rel="noopener">Preliminary Non-Binding Proposal</a>" to acquire all the outstanding shares of the company. The Offer Price will be US$9.08 in cash per ADS (US$2.27 per ordinary share) and this translates to an implied market cap of US$307mn for the company. The Target board has said it had "just received the Proposal Letter and has not had an opportunity to carefully review and evaluate the proposal or make any decision with respect to the Company’s response to the proposal". At the time of writing, the company's shares are at US$8.21 - approximately 9.6% below the Offer Price (10.6% upside).In this insight, we take a look at the details of the proposal to evaluate the likelihood of this Deal going through.More below the fold.

On 8th June, the top shareholders of China Distance Education Hldgs Ltd (Adr) (DL US), Mr.Zhengdong Zhu and his spouse Ms. Baohong Yin, made a "Preliminary Non-Binding Proposal" to acquire all the outstanding shares of the company. The Offer Price will be US$9.08 in cash per ADS (US$2.27 per ordinary share) and this translates to an implied market cap of US$307mn for the company. The Target board has said it had "just received the Proposal Letter and has not had an opportunity to carefully review and evaluate the proposal or make any decision with respect to the Company’s response to the proposal". At the time of writing, the company's shares are at US$8.21 - approximately 9.6% below the Offer Price (10.6% upside).In this insight, we take a look at the details of the proposal to evaluate the likelihood of this Deal going through.More below the fold. 

China Distance Education (DL US): Takeover Proposal by the Founders

China

Fu Shou Yuan International Group, Ltd. is a death care service provider in China.  The Company operates cemeteries and funeral facilities.

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.

Xiamen Unigroup Xue Co., Ltd. offers various educational services. The Company provides after-school tutoring and education consulting. Unigroup Xue also participates in real estate development and investment activities.

China Chunlai Education Group Co., Ltd. provides educational services. The Company offers private higher education services and other services. China Chunlai Education Group provides services in China.

Zhejiang Yasha Decoration Company Ltd. provides decorating services for large-scale infrastructure, high-end luxury hotel and luxury residential property.

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.

Shanghai Xin Nanyang Co., Ltd., through its subsidiaries, manufactures communication products and industrial equipment, develops cable TV network, security trading, and communication systems, provides network integration, education, and precision processing services.

China Kepei Education Group Limited provides educational services. The Company offers high-quality profession-oriented education services and other services. China Kepei Education Group provides services in China.

China YuHua Education operates private education from kindergarten to university in China.

Dong Yi Ri Sheng Home Decoration Group Company Limited designs and constructs set decorations, integrates home decoration materials, manufactures wood products and provides organic home decoration solutions, and its franchise business.

Dong Yi Ri Sheng Home Decoratn Gp (002713 CH)

InvoCare Limited owns and operates funeral homes, cemeteries and crematoriums in Australia. The Company's activities include the provision of funerals, burials and cremations through it's funeral home brands including Blackwell, Guardian, George Hartnett, Le Pine, Purslowe, Simplicity Funerals and White Lady Funerals.

Perdoceo Education Corporation provides educational services. The Company offers a variety of bachelor's, associate, and non-degree programs, with a core curricula of information technologies, visual communication and design technologies, business studies, and culinary arts. Perdoceo Education operates in the United States.

Universal Technical Institute Inc., through its Universal Technical Institute (UTI) campuses, provides technical education training. The Schools, through its UTI campuses, offers automotive, collision repair and refinishing, and diesel training. UTI also offers training in motorcycle, marine, and personal watercraft through its Motorcycle and Marine Mechanics Institutes(MMI).

Universal Technical Institute, Inc (UTI US)

SISB operates a premium K-12 international school in Thailand, adopted Singapore, UK and IBDP curriculum as a blended student pathway in schools. SISB was established in 2001 with the school license under the Private School Act. Currently, there are 6 international schools with over 4,000 students.

G8 Education Limited provides community-focused child care for families to foster their child's development.  The Company also conducts a range of child care services that includes child care centers acquisition, child care centers management, and industry-related project management, services and consultancy.

Lung Yen Life Service Corp operates a cemetery and offers funeral and disposition services.

Laureate Education, Inc. provides educational services. The University offers undergraduate and doctoral degrees in business and management, medical and health sciences, engineering, information technology, architecture, education, law, communications, and hospitality management. Laureate Education operates worldwide.

AcadeMedia AB provides educational services. The Company offers pre-school, elementary, secondary, vocational, adult education, comprehensive lesson plans, skills training, and professional rehabilitation services. AcadeMedia operates throughout Sweden.

Propel Funeral Partners Limited provides funeral services. The Company owns and operates funeral homes, cemeteries, crematoria, and related assets, as well as offers funeral, cremation, burial, and mortuary services. Propel Funeral Partners serves individuals and families in Australia and New Zealand.

Perfect Medical Health Management (previously Perfect Shape Medical Limited) offers slimming and beauty treatments. The Company provides fat softens and dissolves services, laser freckle services, and other services. Perfect Shape Medical offers services in China.

China Education Group Holdings Limited offers educational services. The Company provides private universities operating services, education training services, and other services. China Education Group Holdings offers services in Hong Kong.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Education Group (839 HK)

Maple Leaf Educational Systems: Our Takeaways From FY2020 Results

Seeing little (if any) evidence of permanent deterioration of business economics, we would like to maintain our positive long-term stance as...

Steven Chen

Edvantage Group: Executing in a Tough Environment

Edvantage Group (382 HK), is a great long-term play on education in the Greater Bay Area. Trading at 15x FY21/12x FY22 with >20% CAGR growth and...

Sameer Taneja

Maple Leaf Educational Systems: Deep Value or Value Trap?

With an all-time-low valuation and decent financial track records, does Maple Leaf Educational Systems offers a long-term alpha opportunity?

Steven Chen

China Education Group (中国教育集团) Placement - Likely Expected After Acquisition Announcement

China Education Group (839 HK) is looking to raise about US$216m in its top-up placement with an upsize option of 25m shares. In this note, we will...

Zhen Zhou, Toh

China Distance Education (DL US): Takeover Proposal by the Founders

On 8th June, the top shareholders of China Distance Education Hldgs Ltd (Adr) (DL US), Mr.Zhengdong Zhu and his spouse Ms. Baohong Yin, made a...

Janaghan Jeyakumar, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)