Daily Consumer: TAL Education (TAL): Online Courses Improved Margin in 3Q19, Parents Returning, 44% Upside and more

In this briefing:

1. TAL Education (TAL): Online Courses Improved Margin in 3Q19, Parents Returning, 44% Upside
2. Z IN
3. China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks
4. Global Ex-U.S. Equity Strategy: MSCI EM in Early Stages of Bottoming
5. GER Upcoming EVENTS and Earnings Calendar

1. TAL Education (TAL): Online Courses Improved Margin in 3Q19, Parents Returning, 44% Upside

• We believe that parents of primary school children will bring their children back to tutoring schools when they become aware of the competition in junior high schools.
• The expansion of online business and the change towards small classes are improving both the revenue growth and the margins.
• We believe that the requirement of educator license is not a concern.
• The 5-year P/E band suggests an upside of 44% for the share of TAL Education.

2. Z IN

In spite of a stellar quarter (Q3 FY19), we remain cautious on Zee Entertainment Enterprises (Z IN) and the prospects of broadcasters in India. Hindi GEC is consolidating, and most of the growth is likely to happen in regional channels which remain competitive. Global data suggests ad spends as a % of revenue for many broadcasters and cable operators has been disrupted and couple of year’s down the line, India should be no exception. Contrary to consensus, driven by millennials and non-affordability of second television, cord cutting in India could accelerate sooner than excepted. With an hyper competitive OTT landscape, uncertainty post TRAI Tariff implementations, in an industry suspect to easy value migration, the long term outlook for Zee Entertainment Enterprises (Z IN) and the broadcast Industry warrants attention. The only near term positive for the stock is the potential stake sale to a strategic partner, which is likely to keep the stock price buoyant but only in the near term.

3. China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks

Kepei Education (1890 HK) has raised US$112m at HK$2.48 per share, just slightly above the mid-end of the IPO price range. We have previously covered the insight in: 

• China Kepei Edu (科培教育) Pre-IPO Review – A Well Run Private Higher Education Company
• China Kepei Edu (科培教育) IPO – Regulation Poses Significant Near-Term Risks

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

4. Global Ex-U.S. Equity Strategy: MSCI EM in Early Stages of Bottoming

Our overall global outlook remains cautious and continued downward pressure on global equities remains our expectation. One bright spot is EM (more on this below), which continues to give us hope that global equities can bottom out.  We provide a technical appraisal of major markets and highlight actionable setups within the global Utilities and Staples Sectors.

5. GER Upcoming EVENTS and Earnings Calendar

Next week promises to be a large catalyst driven week, with Apple Inc (AAPL US), NTT Docomo Inc (9437 JP) and Tesla Motors (TSLA US) expected to report results, among others. We have provided a list below of the key equity catalysts for next week as well as potential drivers for M&A deals and stubs. If you are interested in importing this directly into Outlook or have any further requests, please let us know. 

Kind regards, Rickin Arun and Venkat