Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Equity Bottom-Up

China Maple Leaf Educational Systems / Equity Bottom-Up

<ul class=""><li>Maple Leaf accelerated opening new schools in 1H18 (as of Feb 2018) and we believe Maple Leaf can retain the utilization rate.</li><li>In 1H18, both revenue growth and operating margin reached record high since listing (in 2014).</li><li>Maple Leaf’s stock price has not changed much since our last report, but the peer P/E based upside narrows from 27% to 19%, which suggests Maple Leaf is a good defensive ticker.</li></ul>

Maple Leaf accelerated opening new schools in 1H18 (as of Feb 2018) and we believe Maple Leaf can retain the utilization rate.In 1H18, both revenue growth and operating margin reached record high since listing (in 2014).Maple Leaf’s stock price has not changed much since our last report, but the peer P/E based upside narrows from 27% to 19%, which suggests Maple Leaf is a good defensive ticker.

Maple Leaf (1317 HK) – Achieves Both Aggressive Expansion and Record High Margin

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

Global markets are holding at support levels and we reiterate, our neutral but constructive outlook . In today’s report we highlight actionable stocks within countries that are displaying bullish price and relative strength trends, including Japan, Hong Kong, Italy and Norway.

Global markets are holding at support levels and we reiterate, our neutral but constructive outlook . In today’s report we highlight actionable stocks within countries that are displaying bullish price and relative strength trends, including Japan, Hong Kong, Italy and Norway.

Global Equity Strategy: Overweight TOPIX, Hang Seng

Thematic (Sector/Industry)

<ul><li>Most private school operators are also property developers.</li><li>Schools provide stable cash inflows, so that some developers stopped property investment to focus on schools.</li><li>The 1st risk: Property developers may borrow money from schools. They did that before.</li><li>The 2nd risk: Property developers are schools’ landlords and the lease contracts will be based on re-negotiations between relatives.  This raises corporate governance issues.</li><li>In general, we are still optimistic about private schools.</li></ul>

Most private school operators are also property developers.Schools provide stable cash inflows, so that some developers stopped property investment to focus on schools.The 1st risk: Property developers may borrow money from schools. They did that before.The 2nd risk: Property developers are schools’ landlords and the lease contracts will be based on re-negotiations between relatives.  This raises corporate governance issues.In general, we are still optimistic about private schools.

Key Risk to Private Schools: Property Developers Standing Behind

<ul><li>Shanghai Bureau of Education (SBE) distributes selective high schools’ enrolments to non-selective middle school students.</li><li>We believe the new policy provide opportunities for after-school tutoring and private schools, due to the mismatch between students and schools.</li><li>Listed schools, impacted by cancellation of Mathematical Olympiad tests (See <a href="https://www.smartkarma.com/insights/tal-education-tal-us-chaos-in-junior-high-school-application-in-shanghai" target="_blank" data-smartkarma-citation="insights:17836">TAL Education (TAL US) - Chaos in Junior High School Application in Shanghai</a>), should shift classrooms from elementary school pupils to high school students.</li></ul>

Shanghai Bureau of Education (SBE) distributes selective high schools’ enrolments to non-selective middle school students.We believe the new policy provide opportunities for after-school tutoring and private schools, due to the mismatch between students and schools.Listed schools, impacted by cancellation of Mathematical Olympiad tests (See TAL Education (TAL US) - Chaos in Junior High School Application in Shanghai), should shift classrooms from elementary school pupils to high school students.

High School Enrolment Reform at Shanghai Pushing Students to Tutoring and Private Schools

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

Onesmart Education / Equity Capital Markets

OneSmart Education (ONE US), a leading premium after-school tutoring service provider headquartered in Shanghai, is raising USD200m in its IPO to fund the expansion of study centre network.In this insight, we will look at the following items:<ul class=""><li>The company's background, what does it do and what is special about the company?</li><li>The company's expansion strategy and how is it different from its peers?</li><li>How does its financial metrics fare against leading players?</li><li>A red flag on valuation inflation,</li><li>Our thoughts on valuation and how the deal scores in our ECM Framework.</li></ul>

OneSmart Education (ONE US), a leading premium after-school tutoring service provider headquartered in Shanghai, is raising USD200m in its IPO to fund the expansion of study centre network.In this insight, we will look at the following items:The company's background, what does it do and what is special about the company?The company's expansion strategy and how is it different from its peers?How does its financial metrics fare against leading players?A red flag on valuation inflation,Our thoughts on valuation and how the deal scores in our ECM Framework.

OneSmart Education IPO: Leader in the One-On-One Tutoring but Wider Discount Needed

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)

Maple Leaf (1317 HK) – Achieves Both Aggressive Expansion and Record High Margin

Maple Leaf accelerated opening new schools in 1H18 (as of Feb 2018) and we believe Maple Leaf can retain the utilization rate. In 1H18, both...

Ming Lu

Global Equity Strategy: Overweight TOPIX, Hang Seng

Global markets are holding at support levels and we reiterate, our neutral but constructive outlook . In today’s report we highlight actionable...

Vermilion Research

Key Risk to Private Schools: Property Developers Standing Behind

Most private school operators are also property developers. Schools provide stable cash inflows, so that some developers stopped property...

Ming Lu

High School Enrolment Reform at Shanghai Pushing Students to Tutoring and Private Schools

Shanghai Bureau of Education (SBE) distributes selective high schools’ enrolments to non-selective middle school students. We believe the new...

Ming Lu

OneSmart Education IPO: Leader in the One-On-One Tutoring but Wider Discount Needed

OneSmart Education (ONE US), a leading premium after-school tutoring service provider headquartered in Shanghai, is raising USD200m in its IPO to...

Ke Yan, CFA, FRM

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