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

<ul>
<li>The latest bear market rally came to a close last week after the S&amp;P 500 and Nasdaq 100 (QQQ) broke below their respective flag supports at 4070 and $304. </li>
<li>Last week we noted a break of these levels would likely mean a trip back to YTD lows and downtrend channel support, which is precisely where we are now.</li>
<li>We remain bearish as long as the downtrends remain intact on the S&amp;P 500, Nasdaq 100 (QQQ), Russell 2000 (IWM), S&amp;P 600 (IJR), and Russell Micro-Caps (IWC)</li>
</ul>


The latest bear market rally came to a close last week after the S&amp;P 500 and Nasdaq 100 (QQQ) broke below their respective flag supports at 4070 and $304. 
Last week we noted a break of these levels would likely mean a trip back to YTD lows and downtrend channel support, which is precisely where we are now.
We remain bearish as long as the downtrends remain intact on the S&amp;P 500, Nasdaq 100 (QQQ), Russell 2000 (IWM), S&amp;P 600 (IJR), and Russell Micro-Caps (IWC)


US Dollar & 10-Year Treasury Yield Breaking Out; Stick With Energy, Also Buying China Education Svcs

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of <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> are still yet to be fully reflected.</li>
<li>The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.</li>
<li>Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.</li>
</ul>


Despite the 21% spike in share price, we believe good student enrollment outlook and earnings prospects of China Education Group (839 HK) are still yet to be fully reflected.
The 70.1% YoY surge in approved top-up degree program quotas in China and the guidance for substantial quota increase for bachelor’s degree and junior college programs are both exciting.
Its comprehensive cooperation agreement with Bank of China Jiangxi Branch adds another peace of mind as this suggests support from the state and lowers regulatory risks, in our view.


China Education Group (839 HK): Further Evidences for Underlying Health

<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> demonstrates resilience amid market concerns on policy uncertainties by posting a 40.5% growth in 1H22 reported net profit and 20.1% growth in adjusted net profit. </li>
<li>Higher education segment saw 44% profit growth and strengths will sustain into 2H22. Weaker secondary vocational and global education segments will witness a sharp recovery, based on latest application statistics.</li>
<li>CEG has secured increase in tuition and quota in the coming school year, and this will boost FY23 outlook. It opts for an Rmb500m buyback, instead of paying interim dividend.</li>
</ul>



China Education Group (839 HK) demonstrates resilience amid market concerns on policy uncertainties by posting a 40.5% growth in 1H22 reported net profit and 20.1% growth in adjusted net profit. 
Higher education segment saw 44% profit growth and strengths will sustain into 2H22. Weaker secondary vocational and global education segments will witness a sharp recovery, based on latest application statistics.
CEG has secured increase in tuition and quota in the coming school year, and this will boost FY23 outlook. It opts for an Rmb500m buyback, instead of paying interim dividend.


China Education Group (839 HK): Impressive 1H22 Result, Positive Takeaways from Call

Thematic (Sector/Industry)

<ul>
<li>Global EdTech venture funding surged 29% YoY to US$20.8bn in 2021. China saw c.75% YoY decline in EdTech venture funding but India recorded over 60% growth.</li>
<li>Into 2022, we expect EdTech spending and market will continue to grow, venture funding becoming more selective and Asia and workforce are the fastest growing markets.</li>
<li>China stays weak in 1H22 and India will thrive. India has 4 new unicorns in 2021 while none for China. We stick to higher education, not EdTech (tutoring) in China.</li>
</ul>


Global EdTech venture funding surged 29% YoY to US$20.8bn in 2021. China saw c.75% YoY decline in EdTech venture funding but India recorded over 60% growth.
Into 2022, we expect EdTech spending and market will continue to grow, venture funding becoming more selective and Asia and workforce are the fastest growing markets.
China stays weak in 1H22 and India will thrive. India has 4 new unicorns in 2021 while none for China. We stick to higher education, not EdTech (tutoring) in China.


Asia EdTech and China Education: An Update

<ul>
<li>The 42% collapse in share price of <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> (CEG) seems to be overreaction to the speculated regulatory measures which we think many of them are counter-intuitive.</li>
<li>These measures center around the legality of Variable Interest Entity, ban on future M&amp;As, ownership of school assets and prohibition of increase in tuition fee at will.</li>
<li>Higher education, unlike after school tutoring, supports government policy, lightens governments' financial pressure and enhances common prosperity; and CEG remains the best play on this angle. </li>
</ul>


The 42% collapse in share price of China Education Group (839 HK) (CEG) seems to be overreaction to the speculated regulatory measures which we think many of them are counter-intuitive.
These measures center around the legality of Variable Interest Entity, ban on future M&amp;As, ownership of school assets and prohibition of increase in tuition fee at will.
Higher education, unlike after school tutoring, supports government policy, lightens governments' financial pressure and enhances common prosperity; and CEG remains the best play on this angle. 


China Education Group (839 HK): Further Regulatory Headwinds?

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)

US Dollar & 10-Year Treasury Yield Breaking Out; Stick With Energy, Also Buying China Education Svcs

US Dollar $DXY & 10-Year Treasury Yield $TNX Breaking Out; Broad Equity Market Not Likely to Bottom Until the USD and Treasury Yields Start Moving...

Vermilion Research

China Education Group (839 HK): Further Evidences for Underlying Health

Solid growth in approved top-up degree quota brightens CEG's outlook. Even with share price spike, it still trades on cheap 7.1x PER for FY22, with...

Osbert Tang, CFA

China Education Group (839 HK): Impressive 1H22 Result, Positive Takeaways from Call

CEG's 1H22 result is not only impressive by itself, but also clears the market's concerns on policy impacts. Guidances for 2H22 suggest good upside...

Osbert Tang, CFA

Asia EdTech and China Education: An Update

China's EdTech venture funding lagged behind India's in 2021. We expect regulatory concerns to keep China underperforming in 1H22, with India...

Osbert Tang, CFA

China Education Group (839 HK): Further Regulatory Headwinds?

Regulatory speculations have beaten down CEG but may concerns are counter-intuitive and share price has over-reacted. Private participation in...

Osbert Tang, CFA

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