Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Equity Bottom-Up

New Oriental Education & Techn / Equity Bottom-Up

<ul class="">
<li>The record net losses were mainly due to a seasonally weak quarter and recognition of the impairment in a subsidiary.</li>
<li>Q2 revenues did not slow down and management does not believe Q3 revenues will slow down.</li>
<li>EDU will not be negatively impacted by the new law from the Ministry of Education.</li>
<li>The P/E band suggests an upside of 27% and a price target of USD90.</li>
</ul>


The record net losses were mainly due to a seasonally weak quarter and recognition of the impairment in a subsidiary.
Q2 revenues did not slow down and management does not believe Q3 revenues will slow down.
EDU will not be negatively impacted by the new law from the Ministry of Education.
The P/E band suggests an upside of 27% and a price target of USD90.


New Oriental (EDU): Do Not Fear Q2 Record Losses, 27% Upside

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Broad global indexes are bumping up against logical downtrend resistance. As a result, our outlook remains cautious and our baseline expectation for continued downward pressure on global equities remains intact. At the same time, we are seeing signs that the worst of the declines may be behind us as global cyclical Sectors show RS improvements while defensive Sectors display early signs of RS deterioration.  In this report we review important technical levels for developed and EM indexes, and highlight a number of attractive opportunities across markets and sectors.

Broad global indexes are bumping up against logical downtrend resistance. As a result, our outlook remains cautious and our baseline expectation for continued downward pressure on global equities remains intact. At the same time, we are seeing signs that the worst of the declines may be behind us as global cyclical Sectors show RS improvements while defensive Sectors display early signs of RS deterioration.  In this report we review important technical levels for developed and EM indexes, and highlight a number of attractive opportunities across markets and sectors.

Global Indexes Approaching Major Resistance

<ul class="">
<li>The Education Ministry of China promulgated Burden Relief Measures for Students in Primary and Secondary Schools (中小学生减负措施).</li>
<li>The market is concerned about “Article 15” on the educator license.</li>
<li>We note that a large number of teachers in part-time schools took the educator exam in November 2018.</li>
<li>We expect that the incremental passers of the educator exam will be many more than the number of EDU’s vacancies, and that most of the passers will prefer to work for giants such as EDU or TAL (TAL) as opposed to other part-time schools.</li>
</ul>


The Education Ministry of China promulgated Burden Relief Measures for Students in Primary and Secondary Schools (中小学生减负措施).
The market is concerned about “Article 15” on the educator license.
We note that a large number of teachers in part-time schools took the educator exam in November 2018.
We expect that the incremental passers of the educator exam will be many more than the number of EDU’s vacancies, and that most of the passers will prefer to work for giants such as EDU or TAL (TAL) as opposed to other part-time schools.


New Oriental (EDU): Educator License Not A Concern

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Thematic (Sector/Industry)

Our calls had great successes this year starting off calling out a fraudulent US holding company boasting of “world class” AI development in China.  We detected from out site visits and making acquaintances in the office building that the AI team had only one coder/programmer.  We published detailed research on our findings urging clients to short <a href="https://www.smartkarma.com/entities/26739" target="_blank" data-smartkarma-citation="entities:26739:1">Remark Holdings (MARK US)</a>  in January when the share price was $12.4 and today it closed at $1.2, representing 90% profit.

Our calls had great successes this year starting off calling out a fraudulent US holding company boasting of “world class” AI development in China.  We detected from out site visits and making acquaintances in the office building that the AI team had only one coder/programmer.  We published detailed research on our findings urging clients to short Remark Holdings (MARK US)  in January when the share price was $12.4 and today it closed at $1.2, representing 90% profit.

China’s Rude Awakening - Review of Our Best and Worst Calls in 2018+Top Trade Ideas Q1 2019

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

East Buy Holding  / Equity Capital Markets

On November 26, 2018, the Ministry of Education of China released an announcement titled "A Notice with Regard to the Improvement After-School Education and Mechanisms for Special Governance" ( 关于健全校外培训机构专项治理整改若干工作机制的通知). Within the announcement, there are five guidelines to be enforced by the end of this year. In this insight, we will summarize the details of this notice and the potential impact on listed education companies.

On November 26, 2018, the Ministry of Education of China released an announcement titled "A Notice with Regard to the Improvement After-School Education and Mechanisms for Special Governance" ( 关于健全校外培训机构专项治理整改若干工作机制的通知). Within the announcement, there are five guidelines to be enforced by the end of this year. In this insight, we will summarize the details of this notice and the potential impact on listed education companies.

New Regulatory Tightening on Online Education Reads Badly on Koolearn IPO

China

New Oriental Education & Technology Group, Inc. offers educational services. The Company offers foreign language training, test preparation courses for admissions and assessment tests in the United States, the PRC and Commonwealth countries, primary and secondary school education, and other services. New Oriental Education & Technology Group also operates software development.

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New Oriental Education & Techn (EDU US)

New Oriental (EDU): Do Not Fear Q2 Record Losses, 27% Upside

The record net losses were mainly due to a seasonally weak quarter and recognition of the impairment in a subsidiary. Q2 revenues did not slow...

Ming Lu

Global Indexes Approaching Major Resistance

Broad global indexes are bumping up against logical downtrend resistance. As a result, our outlook remains cautious and our baseline expectation...

Vermilion Research

New Oriental (EDU): Educator License Not A Concern

The Education Ministry of China promulgated Burden Relief Measures for Students in Primary and Secondary Schools (中小学生减负措施). The market is...

Ming Lu

China’s Rude Awakening - Review of Our Best and Worst Calls in 2018+Top Trade Ideas Q1 2019

Our calls had great successes this year starting off calling out a fraudulent US holding company boasting of “world class” AI development in...

JL Warren Capital

New Regulatory Tightening on Online Education Reads Badly on Koolearn IPO

On November 26, 2018, the Ministry of Education of China released an announcement titled "A Notice with Regard to the Improvement After-School...

Zhen Zhou, Toh

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