Koolearn Technology Company [SEHK:1797]is a China-based company mainly providing online training courses.
The company has successfully explored a new way to circumvent recent Chinese law changes aimed at reducing stress for K-9 students, now teaching students English through a live shopping platform. Recently, analysts dramatically raised their earnings estimates for Koolearn Technology, suggesting a marked improvement in the company’s fundamentals, after the live English-language sales session went viral. From June 10 to today, the stock has jumped a staggering 568%.
Koolearn Technology and its subsidiaries operated businesses through three segments. The College Education segment is mainly involved in college test preparation, overseas test preparation and English learning. The K-12 Education segment offered after-school tutoring classes and courses designed for standardized college and high school entrance exams. The Early Childhood Education segment primarily offered kid-friendly online educational content through Koolearn’s apps and live online English lessons. K-12 and Preschool departments closed due to new Chinese law.
KooLearn had a major bull run at the start of COVID-19 caused by growing demand for online education, delivered 1 million free lessons, but after a few downside earnings surprises, KooLearn’s stock price the company began to fall, along with the change in legislation, which sent HK1797 to an all-time low. But soon, Koolearn found a way around the restrictions.
The new way to teach
The company jumped on Douyin, TikTok’s sister app in China, when it aired “how to sell” sessions in English. Data showed Koolearn’s live-streaming channel gained more than 1.5 million subscribers between June 9 and June 11. Teachers increased their sales of goods by 19 million Canadian yen ($2.8 million) during the three-day period. After that, the stock rose 40% on the 12th and then 39% on the 13th.
The main objective of the company is to optimize the product system, forming an ecosystem including language courses, knowledge development and international academic disciplines, aimed at attracting a wider customer base. According to Investor Relations, their two main selling points are academic education and Live Stream product sales sessions, shifting their strategic focus to new departments like live e-commerce, study consulting services abroad and closer cooperation with institutions and schools, including JD Logistics trainingan IELTS platinum partner.
study the numbers
The most recent consensus for Koolearn Technology Holding from its six analysts is for revenue of 2.6 billion yen in 2023, which, if achieved, would represent a whopping 326% increase in sales over the past 12 last months. 1797’s revenue (41.8% per year) is expected to grow faster than the Hong Kong market (9.9% per year). Analyst estimates also suggest Koolearn will become profitable next year, by June, with a 51.8% earnings rate forecast for annual earnings growth.
At the end of fiscal 2022, Koolearn’s debt-to-asset ratio is only 20.3% and there is not enough cash on the balance sheet to service all debts. The company is in good financial health, with 1.69 billion yen in assets and only 393.33 million yen in liabilities. Based on current free cash flow, the company has had free cash for over a year.
Koolearn is an extremely fast growing Edtech company, currently trading at a market cap of 28.921 billion HKD ($3.68 billion), trading at 28.9 HKD ($3.68). The 52 weeks range from 2.85 to 37.60 HKD.