I assign a Neutral rating to Chinese online education company Koolearn Technology Holding Limited (OTCPK:KLTHF) [1797:HK].
The K-12 education business is the key growth driver for Koolearn Technology, and all eyes are its location-based live interactive after-school tutoring courses referred to as DFUB. Looking ahead, DFUB has significant room to grow via further expansion into lower-tier cities in Mainland China and price increases.
On the flip side, Koolearn Technology’s K-12 education business remains loss-making, and the company’s recent share placement could possibly suggest that its share price has peaked. Koolearn Technology trades at a premium to most of its online peers, with consensus forward FY 2021 (YE May 31) and FY 2022 Enterprise Value-to-Revenue multiples at 15.9 times and 9.9 times, respectively. As such, I see a Neutral rating for Koolearn Technology as fair.
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