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Koolearn Technology: investors buying this online education stock

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Koolearn Technology Holding [SEHK:1797], is a China-based company mainly engaged in the provision of online education courses.

The company has successfully explored a new way around the recent Chinese legislation changes aimed to reduce stress on K-9 students, by now teaching students English via a Live shopping platform. Recently, analysts have greatly increased their revenue estimates for Koolearn Technology, suggesting a stark improvement in business fundamentals, after the Live English selling session went viral. From June 10th until today, the stock has jumped a staggering 568%.

Koolearn Technology and its subsidiaries operated businesses through three segments, The College Education segment is primarily involved in college test preparation, overseas test preparation, and English language learning. The K-12 Education segment offered after-school tutoring courses and courses designed for standardized college and high school entrance exams. The Pre-school Education segment mainly offered child-friendly online educational content through Koolearn’s apps and live online English classroom courses. The K-12 and Pre-school departments have closed due to China’s newly introduced law.

KooLearn had a major bull-run at the beginning of COVID-19 caused by the surging demand for online education, handed out 1 million free classes, but after a few earnings surprises on the downside the company’s stock price starting to drop, as well as the legislation change, which sent HK1797 to the lowest it has ever been. But soon, Koolearn found a way to get around the restrictions.

The new way of teaching

The company jumped on Douyin, the sister app of TikTok in China, when it streamed ‘how to sell’ sessions in English. Data showed that Koolearn’s live streaming channel gained more than 1.5 million followers between 9th – 11th of June. Teachers increased their goods sales by CN¥19mn ($2.8 million) over the three-day period. After this, stock rose 40% on the 12th then 39% on the 13th.

The company’s major focus is to optimise the product system, forming an ecosystem including language courses, background development and international academic disciplines, aiming to attract a wider customer base. According to investor relations, their two main selling points are college education, and the Live Stream product selling sessions, shifting their strategic focus to new departments like live e-commerce, consulting services for overseas studying, and stronger cooperation with institutions and schools, including JD Logistics Education, an IELTS Platinum Partner.

Koolearn Technology

Studying the numbers

The most recent consensus for Koolearn Technology Holding from its six analysts is for revenues of CN¥2.6bn in 2023 which, if met, would be a huge 326% increase on its sales over the past 12 months. 1797’s revenue (41.8% per year) is forecast to grow faster than the Hong Kong market (9.9% per year). The analysts’ estimates also suggest that Koolearn is going to be turning profitable in the next year, by June, with a 51.8% earning rate Forecast Annual Earnings Growth.

At the end of 2022 financial year, the Debt to Asset ratio for Koolearn is only 20.3%, and there is not enough cash on the balance sheet to pay off all the payables. The company is financially healthy, with CN¥1.69bn in asset and only CN¥393.33m in liabilities. Based on the current free cash flow, the company has a cash-runway for more than a year.

Koolearn is an extremely fast growing Edtech firm, currently trading at 28.921 bn HKD ($3.68 bn) market cap, trading at 28.9HKD (3.68 USD). The 52-week ranges from 2.85 to 37.60 HKD.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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