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

<div><p><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.</p></div><div><p>17 Education has launched its IPO at a price range of $9.50-11.50 per ADS. At the mid-point of the IPO price range, 17 Education will raise net proceeds of $265.2 million. Indications of interest have been received for up to $80 million of the offer shares from the CPE Fund, which is managed by China Pinnacle Equity Management. The IPO will be priced on 3 December. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/17-education-technology-ipo-initiation-acquired-taste" target="_blank" data-smartkarma-citation="insights:45820" rel="noopener">17 Education &amp; Technology IPO Initiation: Acquired Taste</a>, we stated that investing in the China online education 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. Our valuation analysis suggests that the IPO price is attractive. </p></div></div></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 has launched its IPO at a price range of $9.50-11.50 per ADS. At the mid-point of the IPO price range, 17 Education will raise net proceeds of $265.2 million. Indications of interest have been received for up to $80 million of the offer shares from the CPE Fund, which is managed by China Pinnacle Equity Management. The IPO will be priced on 3 December. In 17 Education &amp; Technology IPO Initiation: Acquired Taste, we stated that investing in the China online education 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. Our valuation analysis suggests that the IPO price is attractive. 

17 Education & Technology IPO: Valuation Insights

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.

<p><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. The company has set the terms for its IPO and plans to raise net proceeds of US$265.2m at the midpoint of the IPO pricing of US$10.5 per ADS.</p><p>The company plans to use the proceeds from the IPO on improving the operation of after-school tutoring services and student learning experience, enhancing the product offerings and educational content, investing on technology infrastructure, marketing and other related activities.</p><p>In our previous insight on the company’s IPO, we examine the company’s business model and its financials. Find below an extract from our previous insight:</p><div class="content-highlight"><p>It seems that the company does not have a clear path to profitability, and we remain concerned about the growing losses for the business. Given the intense competition in China’s online education market, the companies are forced to spend aggressively on selling and marketing to attract students for their courses/programs. The large growth in the company’s top line during the pandemic had been common across all online education players in China, however, the top line growth comes at the expense of margins. Moreover, with Covid-19 conditions subsiding and the country returning to normalcy, we expect the company’s top line growth to decline over the next few quarters</p></div>

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. The company has set the terms for its IPO and plans to raise net proceeds of US$265.2m at the midpoint of the IPO pricing of US$10.5 per ADS.The company plans to use the proceeds from the IPO on improving the operation of after-school tutoring services and student learning experience, enhancing the product offerings and educational content, investing on technology infrastructure, marketing and other related activities.In our previous insight on the company’s IPO, we examine the company’s business model and its financials. Find below an extract from our previous insight:It seems that the company does not have a clear path to profitability, and we remain concerned about the growing losses for the business. Given the intense competition in China’s online education market, the companies are forced to spend aggressively on selling and marketing to attract students for their courses/programs. The large growth in the company’s top line during the pandemic had been common across all online education players in China, however, the top line growth comes at the expense of margins. Moreover, with Covid-19 conditions subsiding and the country returning to normalcy, we expect the company’s top line growth to decline over the next few quarters

17 Edu & Tech IPO Valuation: Fairly Valued at the Lower End of the IPO Pricing

<p><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. </p><p>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.</p><div class="content-highlight"><p>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. </p></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

<p><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.</p><p>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.</p>

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.

<p>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.</p><p>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.</p><p>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.</p><p>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.</p>

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

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: Valuation Insights

17 Education has launched its IPO at a price range of $9.50-11.50 per ADS. Our valuation analysis suggests that the IPO price is attractive.

Arun George

17 Edu & Tech IPO Valuation: Fairly Valued at the Lower End of the IPO Pricing

17 Education and Technology has set the terms for its IPO and plans to raise net proceeds of US$265.2m at the midpoint of the IPO pricing of...

Shifara Samsudeen, ACMA, CGMA

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

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