HK/China small/mid-caps specialist

Pep So, CFA, CPA

Equity Bottom-Up

NetDragon's FY16 headline numbers show widened losses as 4Q is traditionally a low season for the education industry. However, the company gave out positive guidance for FY17 as its gaming business will have a breakout year on new launches and more importantly, it targets to achieve profitability for its education business. On top of growing its penetration in its existing markets and tapping into new markets, the company will also start pushing its products into b2c market (i.e. parents). In…

NetDragon's FY16 headline numbers show widened losses as 4Q is traditionally a low season for the education industry. However, the company gave out positive guidance for FY17 as its gaming business will have a breakout year on new launches and more importantly, it targets to achieve profitability for its education business. On top of growing its penetration in its existing markets and tapping into new markets, the company will also start pushing its products into b2c market (i.e. parents). In…

NetDragon: Education Business to Be Profit-Making in FY17

NetDragon (“ND”) is a true innovator as a Chinese internet company. In addition to online game development and operation, ND has built two successful online platforms for online games and mobile apps in the past with millions of users.This time, ND is building its third online platform for its education business. Despite the and strong growth in recent years, Chinese online education industry is highly fragmented and has no dominant industry leader. ND considers this a golden opportunity and is well-positioned to compete in this fast-growing industry with its online education ecosystem. The investment highlights are:<ul><li>Proven management with solid track record: Management has shown capabilities to create value by innovation. It has shown strong expertise in building successful online platforms with millions of users.</li><li>Best-in-class products for education: ND’s online education ecosystem, integrating advanced hardware, platform and content with cutting-edge technologies enables the company to have clear competitive advantages over competitors.</li><li>Strong pipeline for online game: ND’s online game segment has a strong pipeline, following the launch of two popular games in 2H16. ND is incorporating some of its proprietary VR/AR technologies in some of its upcoming games which will enhance gamer experience.</li><li>Limited downside, unlimited upside: We estimate ND’s floor value to be HKD18 per share by using sum-of-parts valuation under a very conservative scenario, which represents only 20% downside from the current level. Meanwhile, ND’s upside is unlimited once its platform becomes a go-to education platform for users not just from China but also from countries around the world!</li></ul>Despite the significant progress made in its education business, investors seem to be overlooking the stock due to limited profit contribution just yet. However, that should not last long as multiple catalysts, including Series B funding and the start of monetization, are emerging this year.

NetDragon (“ND”) is a true innovator as a Chinese internet company. In addition to online game development and operation, ND has built two successful online platforms for online games and mobile apps in the past with millions of users.This time, ND is building its third online platform for its education business. Despite the and strong growth in recent years, Chinese online education industry is highly fragmented and has no dominant industry leader. ND considers this a golden opportunity and is well-positioned to compete in this fast-growing industry with its online education ecosystem. The investment highlights are:Proven management with solid track record: Management has shown capabilities to create value by innovation. It has shown strong expertise in building successful online platforms with millions of users.Best-in-class products for education: ND’s online education ecosystem, integrating advanced hardware, platform and content with cutting-edge technologies enables the company to have clear competitive advantages over competitors.Strong pipeline for online game: ND’s online game segment has a strong pipeline, following the launch of two popular games in 2H16. ND is incorporating some of its proprietary VR/AR technologies in some of its upcoming games which will enhance gamer experience.Limited downside, unlimited upside: We estimate ND’s floor value to be HKD18 per share by using sum-of-parts valuation under a very conservative scenario, which represents only 20% downside from the current level. Meanwhile, ND’s upside is unlimited once its platform becomes a go-to education platform for users not just from China but also from countries around the world!Despite the significant progress made in its education business, investors seem to be overlooking the stock due to limited profit contribution just yet. However, that should not last long as multiple catalysts, including Series B funding and the start of monetization, are emerging this year.

NetDragon: Quality Business with Limited Downside & Unlimited Upside. Value or Growth? Why Not Both!

Hong Kong

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Hi Sun Technology (China) Limited provides business and technology consulting services and solutions.  The Company delivers a range of specialized services and solutions to its banking, insurance, securities, telecommunications, and utilities clients.  In addition, Hi Sun, through its subsidiaries, provides consulting and information technology outsourcing services and payment solution.

CWT International Limited operates as a holding company. The Company through its subsidiaries engages in digital network operation, Hi-Tech value added services, and energy-saving products manufacturing and services.

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AurionPro Solutions Limited provides software solutions and offshore information technology outsourcing services to banking, financial services, and technology companies.

Toyou Feiji Electronics Company Limited researches, develops and applies data storage and protection, disaster recovery and related technologies. The Company's main products include disk storage systems, storage management softwares, data storage solutions, and technical services.

Qiming Information Technology Co., Ltd. develops, manufactures, sells and supports software products. The company's main software products are used in auto industry management, manufacturing and individual auto drivers.

Beijing Orient National Communication Science & Technology Company Limited develops and sells enterprise business system solution and provides related technical services. The Company's main product is data management software.

Beijing VRV Software Corporation Limited develops, manufactures and sells information security software products, and provides technical services. The Company's main products include terminal security management products, data security management products, and security management platforms.

Digimarc Corporation provides digital watermarking technologies that allow imperceptible digital code to be embedded in printed or digital versions of visual content.  Content includes movies, photographic or artistic images, and valuable documents such as financial instruments, passports, and tickets.

Insyde Software Corp. provides notebook basic input output system (BIOS), IA (Internet Appliance) BIOS, personal computer (PC) card software, and device drivers.

NetDragon Websoft, Inc. develops online internet games. The Company offers tracks player behaviour and purchasing patterns to design games that cater to their customers' tastes. NetDragon Websoft operates worldwide.

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Netdragon Websoft (777 HK)

NetDragon: Education Business to Be Profit-Making in FY17

NetDragon's FY16 headline numbers show widened losses as 4Q is traditionally a low season for the education industry. However, the company gave out...

Pep So, CFA, CPA

NetDragon: Quality Business with Limited Downside & Unlimited Upside. Value or Growth? Why Not Both!

NetDragon (“ND”) is a true innovator as a Chinese internet company. In addition to online game development and operation, ND has built two...

Pep So, CFA, CPA

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