HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

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?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Orient Overseas International / Event-Driven

<ul>
<li>The review period for the March review of the HSCI ends on 31 December. There are expected to be a lot more inclusions than deletions at the review.</li>
<li>There are quite a few stocks that should be included following their listing over the last couple of months while others are now potential inclusions after passing the velocity test.</li>
<li>Quite a few of the potential deletions from the HSCI and Stock Connect have large holdings via Southbound Stock Connect and these stock could see some selling.</li>
</ul>


The review period for the March review of the HSCI ends on 31 December. There are expected to be a lot more inclusions than deletions at the review.
There are quite a few stocks that should be included following their listing over the last couple of months while others are now potential inclusions after passing the velocity test.
Quite a few of the potential deletions from the HSCI and Stock Connect have large holdings via Southbound Stock Connect and these stock could see some selling.


HSCI Index Rebalance and Stock Connect: More Inclusions than Exclusions in March

<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

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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

China Education Group (839 HK) is looking to raise up to US$154m in its top-up placement. This will be the third placement by the group over the past 15 months.We covered the previous placement in Jan 21, China Education Group Placement - Back for More, past Deal Didn’t Do Well.In this note, we will look  at the deal dynamics and run the deal through framework.

China Education Group (839 HK) is looking to raise up to US$154m in its top-up placement. This will be the third placement by the group over the past 15 months.We covered the previous placement in Jan 21, China Education Group Placement - Back for More, past Deal Didn’t Do Well.In this note, we will look  at the deal dynamics and run the deal through framework.

China Education Group Placement - Recent Momentum Is Strong but past Deal Record Isn’t Supportive

China

China Maple Leaf Educational Systems Limited is a Chinese international school operator. The Company operates high schools, middle schools and elementary schools across various Chinese cities.

China Maple Leaf Educational Systems (1317 HK)

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China Maple Leaf Educational Systems (1317 HK)

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

HSCI Index Rebalance and Stock Connect: More Inclusions than Exclusions in March

We expect there will be a lot more inclusions than exclusions at the March rebalance of the HSCI. The changes to the index will result in changes...

Brian Freitas

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

China Education Group Placement - Recent Momentum Is Strong but past Deal Record Isn’t Supportive

China Education Group (839 HK) is looking to raise up to US$154m in its top-up placement. This will be the third placement by the group over the...

Sumeet Singh

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