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Articles from Caixin Global

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Cross Asset Strategy

<ul><li>Xiaohongshu / In Depth: Xiaohongshu’s push to make users open their wallets</li><li>Personnel /: Chinese finance veteran to join World Bank leadership</li><li>Ping An /: Ping An Real Estate gets $1.1 billion credit line as debt pressure mounts</li></ul>

Xiaohongshu / In Depth: Xiaohongshu’s push to make users open their walletsPersonnel /: Chinese finance veteran to join World Bank leadershipPing An /: Ping An Real Estate gets $1.1 billion credit line as debt pressure mounts

CX Daily: Xiaohongshu’s Push to Make Users Open Their Wallets 

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-east-education-holdings" target="_blank" data-smartkarma-citation="entities:27843:1" rel="noopener">China East Education (667 HK)</a> is interesting as it is probably the only education company with no debt. Net cash amounted to Rmb2.1bn, or 42% of its market capitalisation. </li>
<li>Earnings have bottomed out and the marginal YoY decline in 1H23 is due to upfront costs for staff recruitment. Its vocational education focus also faces fewer regulatory risks.</li>
<li>We consider it a potential privatisation candidate at 0.8x P/B. Its major shareholders owned 75% of the company, leaving a free float of less than HK$1.4bn.</li>
</ul>



China East Education (667 HK) is interesting as it is probably the only education company with no debt. Net cash amounted to Rmb2.1bn, or 42% of its market capitalisation. 
Earnings have bottomed out and the marginal YoY decline in 1H23 is due to upfront costs for staff recruitment. Its vocational education focus also faces fewer regulatory risks.
We consider it a potential privatisation candidate at 0.8x P/B. Its major shareholders owned 75% of the company, leaving a free float of less than HK$1.4bn.


China East Education (667 HK): Getting More Interesting

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a> appears to be facing the headwinds from higher USD interest rate and reduction in capitalised interest. The intangible write-off is another drag on FY23.</li>
<li>Newly registered students increased 17.8% for FY24. With better average fees, this will help the topline. Our concerns are high finance and operating costs will erode revenue growth.</li>
<li>Consensus is overly aggressive and there are risks of downgrade. Earnings may re-accelerate in the future, but weaker 1H FY24F keeps us on the sideline in the short term. </li>
</ul>



China Education Group (839 HK) appears to be facing the headwinds from higher USD interest rate and reduction in capitalised interest. The intangible write-off is another drag on FY23.
Newly registered students increased 17.8% for FY24. With better average fees, this will help the topline. Our concerns are high finance and operating costs will erode revenue growth.
Consensus is overly aggressive and there are risks of downgrade. Earnings may re-accelerate in the future, but weaker 1H FY24F keeps us on the sideline in the short term. 


China Education Group (839 HK): Not so Encouraging in the near Term

<ul>
<li>Adjusted net profit at <a href="https://www.smartkarma.com/entities/china-education-group-holdin" target="_blank" data-smartkarma-citation="entities:18218:1" rel="noopener">China Education Group (839 HK)</a> grew 15.1% in 1H23, accelerated from 5% in 2H22. We are delighted to see resumption of interim DPS at Rmb0.164.</li>
<li>FY23 outlook will be underpinned by higher education student enrollment and tuition increase. Strengthened financial position offers opportunities for both organic and M&amp;A growth.</li>
<li>Potential upside will also come from completion of for-profit conversion at Jiangxi University of Technology. We consider its 7.9x PER, 1x P/B, 13.3% ROE and 5.5% yield attractive.</li>
</ul>


Adjusted net profit at China Education Group (839 HK) grew 15.1% in 1H23, accelerated from 5% in 2H22. We are delighted to see resumption of interim DPS at Rmb0.164.
FY23 outlook will be underpinned by higher education student enrollment and tuition increase. Strengthened financial position offers opportunities for both organic and M&amp;A growth.
Potential upside will also come from completion of for-profit conversion at Jiangxi University of Technology. We consider its 7.9x PER, 1x P/B, 13.3% ROE and 5.5% yield attractive.


China Education Group (839 HK): Sustaining the Healthy Track Record

<ul>
<li>Despite the rally in share price after trading resumption and a reasonable FY22 result, there are still several tough issues faced by <a href="https://www.smartkarma.com/entities/china-yuhua-education" target="_blank" data-smartkarma-citation="entities:23627:1" rel="noopener">China Yuhua Education (6169 HK)</a>. </li>
<li>Cash management, especially for offshore; no dividend payout in the near term; availability of CB refinancing and weakened margins are just some of the challenges. </li>
<li>Conversion to profit-basis for its schools and the operating outlook for new schools are also added issues that it needs to address. In our view, risks still outweigh return.</li>
</ul>


Despite the rally in share price after trading resumption and a reasonable FY22 result, there are still several tough issues faced by China Yuhua Education (6169 HK). 
Cash management, especially for offshore; no dividend payout in the near term; availability of CB refinancing and weakened margins are just some of the challenges. 
Conversion to profit-basis for its schools and the operating outlook for new schools are also added issues that it needs to address. In our view, risks still outweigh return.


China Yuhua Education (6169 HK): Issues Are Not over Yet

Hong Kong

Hope Education Group Co, Ltd. offers educational services. The Company provides educational training, knowledge point sharing, activities arrangement, and other services. Hope Education Group offers its services throughout China.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
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Hope Education Group Co Ltd (1765 HK)

CX Daily: Xiaohongshu’s Push to Make Users Open Their Wallets

Xiaohongshu / In Depth: Xiaohongshu’s push to make users open their wallets Social sharing app Xiaohongshu has been talking a big game about its...

Caixin Global

China East Education (667 HK): Getting More Interesting

China East Education is debt-free with strong net cash. Earnings have stabilised, and it faces fewer regulatory risks. It is a potential...

Osbert Tang, CFA

China Education Group (839 HK): Not so Encouraging in the near Term

CEG is facing challenges from higher USD interest rates, reduced capitalised interest, and write-offs. Despite a 17.8% increase in new students,...

Osbert Tang, CFA

China Education Group (839 HK): Sustaining the Healthy Track Record

Higher education student enrollment and tuition increase will support FY23 growth, while stronger financial position offers opportunities for...

Osbert Tang, CFA

China Yuhua Education (6169 HK): Issues Are Not over Yet

Despite avoiding default on CBs, Yuhua still faces challenges from cash management, no near-term dividend payout, availability of CB refinancing...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

CX Daily: Xiaohongshu’s Push to Make Users Open Their Wallets

Xiaohongshu / In Depth: Xiaohongshu’s push to make users open their wallets Social sharing app Xiaohongshu has been talking a big game about its...

Caixin Global

China East Education (667 HK): Getting More Interesting

​China East Education is debt-free with strong net cash. Earnings have stabilised, and it faces fewer regulatory risks. It is a potential...

Osbert Tang, CFA

China Education Group (839 HK): Not so Encouraging in the near Term

​CEG is facing challenges from higher USD interest rates, reduced capitalised interest, and write-offs. Despite a 17.8% increase in new students,...

Osbert Tang, CFA

China Education Group (839 HK): Sustaining the Healthy Track Record

Higher education student enrollment and tuition increase will support FY23 growth, while stronger financial position offers opportunities for...

Osbert Tang, CFA

China Yuhua Education (6169 HK): Issues Are Not over Yet

Despite avoiding default on CBs, Yuhua still faces challenges from cash management, no near-term dividend payout, availability of CB refinancing...

Osbert Tang, CFA

China East Education is debt-free with strong net cash. Earnings have stabilised, and it faces fewer regulatory risks. It is a potential...

CEG is facing challenges from higher USD interest rates, reduced capitalised interest, and write-offs. Despite a 17.8% increase in new students,...