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

MD, Blue Lotus Research Institute

Gu Jun, CFA

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

The key to understand education:(1) resource imbalance creates demand for after-school tutoring and in-school teaching. It will persist,(2) burden reduction is for real because China’s birth rate is dangerously low,(3) product will change from after-school tutoring to after-school tutoring+activities,(4) in-school teaching will also see less standardization in products,(5) but channel superiority, not product, is the key success factor in education so EDU and TAL still rule,(6) margin might deteriorate due to reduction in standardization but technology will improve margin,(7) speed of this happening is the key,(8) scalability is the problem for most in-school-teaching institutions. In the long run, we still prefer TAL and EDU.

The key to understand education:(1) resource imbalance creates demand for after-school tutoring and in-school teaching. It will persist,(2) burden reduction is for real because China’s birth rate is dangerously low,(3) product will change from after-school tutoring to after-school tutoring+activities,(4) in-school teaching will also see less standardization in products,(5) but channel superiority, not product, is the key success factor in education so EDU and TAL still rule,(6) margin might deteriorate due to reduction in standardization but technology will improve margin,(7) speed of this happening is the key,(8) scalability is the problem for most in-school-teaching institutions. In the long run, we still prefer TAL and EDU.

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Equity Bottom-Up

Summary<ul>
<li>Management’s revenue expectation for 1Q19 (as of May 2018) suggests a QOQ decline over weak season.</li>
<li>TAL hired CEO of Coursera, a large US-headquartered online course provider, in April.</li>
<li>TAL launched VIPX, an online 1-on-1 English program in April.</li>
<li>TAL started “to B” to sell programs to outside schools.</li>
<li>The Company aggressively tried new businesses, but we are still conservative about the revenue growth in 2019.</li>
</ul> QOQ Decline over Weak Season<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/050/750/original/Pic%201.PNG?1524742029" class="editor-image img-responsive" data-smartkarma-image-id="50750"></figure>Management expects that 1Q19 (as of May 2018) revenues…

Summary
Management’s revenue expectation for 1Q19 (as of May 2018) suggests a QOQ decline over weak season.
TAL hired CEO of Coursera, a large US-headquartered online course provider, in April.
TAL launched VIPX, an online 1-on-1 English program in April.
TAL started “to B” to sell programs to outside schools.
The Company aggressively tried new businesses, but we are still conservative about the revenue growth in 2019.
 QOQ Decline over Weak SeasonManagement expects that 1Q19 (as of May 2018) revenues…

TAL Education (TAL) – Mgt. Expects QOQ Decline for Q1, First Time in 5 Years

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

A month or so ago it was officially revealed that a China Depositary Receipt program was on its way (it had been mooted unofficially for many months before that). Various officials at the CSRC and indeed even Premier Li Keqiang made supportive comments on the return of Internet+ stocks to a Chinese listing. Caixin, Xinhua, and China Daily saw a flurry of articles supporting the concept in mid-March, and in an article just before the Two Sessions, the China Daily suggested rules would come out…

A month or so ago it was officially revealed that a China Depositary Receipt program was on its way (it had been mooted unofficially for many months before that). Various officials at the CSRC and indeed even Premier Li Keqiang made supportive comments on the return of Internet+ stocks to a Chinese listing. Caixin, Xinhua, and China Daily saw a flurry of articles supporting the concept in mid-March, and in an article just before the Two Sessions, the China Daily suggested rules would come out…

Pilot Program on China Depositary Receipts Launched - Expect the Big 5 to Prep Quickly

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

Actionable Charts from Smart Karma’s Most-Searched Tickers.We ran through a list of the most frequently searched tickers on the SmartKarma platform using the Discovery Tool.  Notable themes include:<ul><li>Energy and Materials stocks continue to strengthen, with the exception of Australian names. </li><li>Financial stocks are strengthening, excluding Australian names. </li><li>Regional casino and education stocks are exhibiting uptrends.</li></ul>See the attached report for a complete list of our recommendations from this list.

Actionable Charts from Smart Karma’s Most-Searched Tickers.We ran through a list of the most frequently searched tickers on the SmartKarma platform using the Discovery Tool.  Notable themes include:Energy and Materials stocks continue to strengthen, with the exception of Australian names. Financial stocks are strengthening, excluding Australian names. Regional casino and education stocks are exhibiting uptrends.See the attached report for a complete list of our recommendations from this list.

Popular Stocks, Attractive and Unattractive Charts

China

TAL Education Group provides educational services. The Company offers comprehensive tutoring services to students covering core academic subjects such as mathematics, English, Chinese, physics, chemistry, political science, history, and biology. TAL Education Group serves students in China.

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TAL Education (TAL US)

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

China Education Sector Update

The key to understand education:(1) resource imbalance creates demand for after-school tutoring and in-school teaching. It will persist,(2) burden...

Blue Lotus Research Institute

TAL Education (TAL) – Mgt. Expects QOQ Decline for Q1, First Time in 5 Years

Summary Management’s revenue expectation for 1Q19 (as of May 2018) suggests a QOQ decline over weak season. TAL hired CEO of Coursera, a large...

Ming Lu

Pilot Program on China Depositary Receipts Launched - Expect the Big 5 to Prep Quickly

A month or so ago it was officially revealed that a China Depositary Receipt program was on its way (it had been mooted unofficially for many...

Travis Lundy

Popular Stocks, Attractive and Unattractive Charts

Actionable Charts from Smart Karma’s Most-Searched Tickers.We ran through a list of the most frequently searched tickers on the SmartKarma platform...

Vermilion Research

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