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)

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

We continue to move increasingly toward the bullish camp and we believe equities are poised for higher prices moving forward. In today’s report we outline our bullish case and highlight attractive Groups and stocks within Financials, Services, Technology and Manufacturing: Credit Card Issuers, Education Services, China, Solar Energy, and Industrial Rental Equipment.

We continue to move increasingly toward the bullish camp and we believe equities are poised for higher prices moving forward. In today’s report we outline our bullish case and highlight attractive Groups and stocks within Financials, Services, Technology and Manufacturing: Credit Card Issuers, Education Services, China, Solar Energy, and Industrial Rental Equipment.

U.S. Equity Strategy: Upgrading Cap-Weighted Communications to Overweight

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Equity Bottom-Up

Summary
<ul>
<li>The education authorities’ “burden relief” policy negatively impacted tutoring programs for elementary schools pupils, but One Smart operates 1-on-1 programs which meet the needs of high school students.</li>
<li>Many tutoring schools failed in 1-on-1 businesses, merely because they focused on elementary school pupils. But One Smart mainly covers high school programs.</li>
<li>Based on P/E ratio comparison with other part-time tutoring schools, we believe One Smart has upside of 28% by August 2019.</li>
</ul>

Summary

The education authorities’ “burden relief” policy negatively impacted tutoring programs for elementary schools pupils, but One Smart operates 1-on-1 programs which meet the needs of high school students.
Many tutoring schools failed in 1-on-1 businesses, merely because they focused on elementary school pupils. But One Smart mainly covers high school programs.
Based on P/E ratio comparison with other part-time tutoring schools, we believe One Smart has upside of 28% by August 2019.


One Smart (ONE): Only 1-On-1 Operators Will Not Be Impacted By “Burden Relief” Policy

APAC IPOs & Placements

Zhen Zhou, Toh

Smartkarma

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

Research Reinvented

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/27137" target="_blank" data-smartkarma-citation="entities:27137:1">Puxin Ltd (NEW US)</a> is looking to raise up to US$144m in its upcoming IPO. Proceeds will be mostly used for strategic acquisitions with any remaining cash used for general corporate purposes.Adding up all the acquisitions that the company has made since 2015 implies that the company is asking for an IPO valuation that is 4.9x of its total acquisition costs. Even if we assume that the acquisitions from 2015 and 2016 have grown by 5x, investors are essentially paying for a valuation that implies that Puxin can grow its FY2017 acquisitions by 4.8x which seems to be a stretch given the limited track record of the company.In this insight, we will be looking at the company's overall financial performance, examine its acquisitions, compare the company against listed education peers. As usual, we will also run the deal through our ECM framework.

Puxin Ltd (NEW US) is looking to raise up to US$144m in its upcoming IPO. Proceeds will be mostly used for strategic acquisitions with any remaining cash used for general corporate purposes.Adding up all the acquisitions that the company has made since 2015 implies that the company is asking for an IPO valuation that is 4.9x of its total acquisition costs. Even if we assume that the acquisitions from 2015 and 2016 have grown by 5x, investors are essentially paying for a valuation that implies that Puxin can grow its FY2017 acquisitions by 4.8x which seems to be a stretch given the limited track record of the company.In this insight, we will be looking at the company's overall financial performance, examine its acquisitions, compare the company against listed education peers. As usual, we will also run the deal through our ECM framework.

Puxin Education IPO Review - Asking for 4.9x of Company's Total Acquisition Cost Since 2015

China

Four Seasons Education (Cayman) Inc. operates as a leading Shanghai based educational company. The Company provides comprehensive after-school education services with a focus on high-quality elementary school math education. Four Seasons Education (Cayman) also expends physics, chemistry, and languages courses to middle school and kindergarten.

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Four Seasons Education Cayman (FEDU 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

U.S. Equity Strategy: Upgrading Cap-Weighted Communications to Overweight

We continue to move increasingly toward the bullish camp and we believe equities are poised for higher prices moving forward. In today’s report we...

Vermilion Research

One Smart (ONE): Only 1-On-1 Operators Will Not Be Impacted By “Burden Relief” Policy

Summary The education authorities’ “burden relief” policy negatively impacted tutoring programs for elementary schools pupils, but One Smart...

Ming Lu

Puxin Education IPO Review - Asking for 4.9x of Company's Total Acquisition Cost Since 2015

Puxin Ltd (NEW US) is looking to raise up to US$144m in its upcoming IPO. Proceeds will be mostly used for strategic acquisitions with any...

Zhen Zhou, Toh

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