Research on Tech Companies

Evelyn Zhang

Thematic (Sector/Industry)

A series of recent Chinese policies promoting vocational schools instead of traditional secondary education, and efforts to eliminate after-class cramming makes me to recommend short K12 education related stocks and long vocational training related stocks.

A series of recent Chinese policies promoting vocational schools instead of traditional secondary education, and efforts to eliminate after-class cramming makes me to recommend short K12 education related stocks and long vocational training related stocks.

A Twist of Fate – China’s Suppression of Secondary Education in Favor of Vocational Education

Alpha-Centric ESG Research

Kyle Rudden

In <a href="https://www.smartkarma.com/insights/delisting-deceitful-chinese-companies-act-not-a-slam-dunk-and-has-more-bark-than-bite-if-it-passes" target="_blank" data-smartkarma-citation="insights:40025" rel="noopener">"Delisting Deceitful Chinese Companies Act" Not a Slam Dunk and Has More Bark Than Bite if It Passes</a>, I made three "predictions." First, the U.S. House of Representatives would not get around to voting on the "delisting act" before the end of the Congressional session. Second, if the House does vote, it would likely pass the bill. Third, if the bill passes, it would have more bark than bite.As a bloke called Meat Loaf once sung, "two out of three ain't bad."On Wednesday, the House voted and passed Senate Bill 945, titled the "Holding Foreign Companies Accountable Act." That the House managed to vote amidst the dual chaos of a raging pandemic and an unhinged President – so close to adjourning this 116th Congress – is a surprise. That it voted to pass S945 is not at all surprising, however, given widespread bi-partisan support for the bill.The real epiphany comes from additional details provided during House testimony just prior to the vote. Not many, but those details that were disclosed (plus the tone in which they were articulated) shed light on how S945 will be implemented and enforced by the SEC, and why foreign issuers and investors should duly-cautious but not overly-concerned. And why this "delisting bill" is ...... more bark than bite.This Insight presents an updated analysis of S945 (general and China/Hong Kong-specific aspects), shares new details provided by Representative Brad Sherman, offers an opinion on the SEC's likely approach to writing and enforcing S945 rules, analyses China/Hong Kong stocks most at risk under S945, and stocks affected by the France/Belgium angle (similar to China/Hong Kong).

In "Delisting Deceitful Chinese Companies Act" Not a Slam Dunk and Has More Bark Than Bite if It Passes, I made three "predictions." First, the U.S. House of Representatives would not get around to voting on the "delisting act" before the end of the Congressional session. Second, if the House does vote, it would likely pass the bill. Third, if the bill passes, it would have more bark than bite.As a bloke called Meat Loaf once sung, "two out of three ain't bad."On Wednesday, the House voted and passed Senate Bill 945, titled the "Holding Foreign Companies Accountable Act." That the House managed to vote amidst the dual chaos of a raging pandemic and an unhinged President – so close to adjourning this 116th Congress – is a surprise. That it voted to pass S945 is not at all surprising, however, given widespread bi-partisan support for the bill.The real epiphany comes from additional details provided during House testimony just prior to the vote. Not many, but those details that were disclosed (plus the tone in which they were articulated) shed light on how S945 will be implemented and enforced by the SEC, and why foreign issuers and investors should duly-cautious but not overly-concerned. And why this "delisting bill" is ...... more bark than bite.This Insight presents an updated analysis of S945 (general and China/Hong Kong-specific aspects), shares new details provided by Representative Brad Sherman, offers an opinion on the SEC's likely approach to writing and enforcing S945 rules, analyses China/Hong Kong stocks most at risk under S945, and stocks affected by the France/Belgium angle (similar to China/Hong Kong).

House Passes "Delisting Act" Giving SEC 90 Days to Write Its Rules (And Yes, More Bark Than Bite)

Equity Analyst, LightStream Research

Supun Walpola

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.

Equity Capital Markets

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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.
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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.


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

Shifara Samsudeen, ACMA, CGMA

Equity Bottom-Up

<ul>
<li>One of the largest online education service providers in China, Koolearn’s shares have risen more than 79% since the beginning of this year from HK$18.6 to HK$33.3 by the end of Friday’s close.</li>
<li>The rally in the company’s share price was mainly due to the Covid-19 outbreak which has had a positive impact on Chinese online education companies. Since schools in China closed for Lunar new year in January, the reopening of schools has been delayed in order to prevent the spread of the virus and the parents and students have turned to online education companies.</li>
</ul><div style="text-align: center;" class="content-caption">The Share Prices of Online Education Providers Have Rallied Over the Last Three Months</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/933/original/image_24633394321583123453740.png?1583123455" class="editor-image img-responsive" data-smartkarma-image-id="120933"></figure><div class="content-caption">Source: Cap IQ</div><ul><li>Of the online education segments in China, it is the after-school tuition classes (K-12) which has seen the biggest growth over the past few years. In this insight, we take a look at Koolearn’s business model, revenue and margins and valuation in an attempt to assess whether the virus-driven growth is sustainable in the long-run.</li></ul>


One of the largest online education service providers in China, Koolearn’s shares have risen more than 79% since the beginning of this year from HK$18.6 to HK$33.3 by the end of Friday’s close.
The rally in the company’s share price was mainly due to the Covid-19 outbreak which has had a positive impact on Chinese online education companies. Since schools in China closed for Lunar new year in January, the reopening of schools has been delayed in order to prevent the spread of the virus and the parents and students have turned to online education companies.
The Share Prices of Online Education Providers Have Rallied Over the Last Three MonthsSource: Cap IQOf the online education segments in China, it is the after-school tuition classes (K-12) which has seen the biggest growth over the past few years. In this insight, we take a look at Koolearn’s business model, revenue and margins and valuation in an attempt to assess whether the virus-driven growth is sustainable in the long-run.

Koolearn Shares Rise as More Children Move into Online Education; Can They Sustain This Growth?

United States

LAIX Inc. operates as a holding company. The Company, through its subsidiaries, offers an education platform that provides big data, education pedagogies, and online English learning services. LAIX serves clients in China.

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LAIX Inc (LAIX US)

A Twist of Fate – China’s Suppression of Secondary Education in Favor of Vocational Education

Change is afoot in one of China's main social mobility mechanism, the education system. The country is promoting vocational education in an effort...

Evelyn Zhang

House Passes "Delisting Act" Giving SEC 90 Days to Write Its Rules (And Yes, More Bark Than Bite)

The U.S. House of Representatives passed Senate Bill 945, the "Holding Foreign Companies Accountable Act." New details support the notion that S945...

Kyle Rudden

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

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

Koolearn Shares Rise as More Children Move into Online Education; Can They Sustain This Growth?

One of the largest online education service providers in China, Koolearn’s shares have risen more than 79% since the beginning of this year from...

Shifara Samsudeen, ACMA, CGMA

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