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NTES-S(9999)
Analysis：
For the second quarter ended June 30 2020, NetEase (9999.HK) recorded net revenues of RMB18.2 billion (US$2.6 billion), an increase of 25.9% compared with the second quarter of 2019. Net income from continuing operations attributable to the Company's shareholders was RMB4.5 billion (US$642.3 million). The growth was attributable to the strong performances from its online game services and NetEase Cloud Music. Advanced near-term titles for release including Onmyoji: Yokai Koya, as well as other upcoming titles in the pipeline such as: The Lord of the Rings: Rise to War, Harry Potter: Magic Awakened, For All Time, Revelation mobile game, Ghost World Chronicle, Nightmare Breaker, Infinite Lagrange, Diablo Immortal and Pokémon Quest.(I do not hold the above stock)
Strategy：
Buy-in Price: $150, Target Price: $165, Cut Loss Price: $142.5
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IGG(799)
Analysis：
IGG (799.HK) principally engages in the development and operation of mobile, browser and client-based online games in the international market. The company's adjusted net profit was USD 133 million, up by 84% yoy. This huge increase was mainly attributed by the impressive performance of “Lord Mobile”. The monthly gross billing of “Lord Mobile” has resumed to USD 54 million in 1H20, and it has even reached its new high of over USD 60 million in July. We expect the gross billing of the game can maintain its relatively high level in the second half of the year. The company is continuing to enhance its newly issued game《Omega Legend》 and will promote and publish it worldwide at an appropriate time. Further, in order to improve the R&D capabilities, the company will expand its R&D team and will start up multiple game development studios in China in 2H20.
Strategy：
Buy-in Price: $9.40, Target Price: $10.35, Cut Loss Price: $8.93
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The new policies on the education industry mainly affects the Compulsory Education Sector and has tiny effect on Higher Education Sector
During the fifteenth meeting of the Central Committee for Comprehensively Deepening Reform (中央全面深化改革委員會第十五次會議) on the 1st of September, President Xi Jinping has presided over the guideline of vitalizing higher education in the country's central and western regions《關於新時代振興中西部高等教育的若干意見》and the guideline of standardizing private schools for compulsory education《關於規範民辦義務教育發展的實施意見》. The guideline of standardizing private schools for compulsory education 《關於規範民辦義務教育發展的實施意見》is in line with the Implementing Regulations for the Law for Promoting Private Education of the PRC (Revised Draft) (Draft for Review) 《民促法實施條例（修訂草案）（送審稿）》 issued in 2018. It restated the public welfare attributes of compulsory education (primary and junior high school). Further, the opinions on further strengthening and standardizing the management of education fees 《關於進一步加強和規範教育收費管理的意見》published by Ministry of Education and other four departments at the end of August is also consistent with the Implementing Regulations for the Law for Promoting Private Education of the PRC (Revised Draft) (Draft for Review) 《民促法實施條例（修訂草案）（送審稿）》, stating that the individual school fees can only be adjusted by the provincial Governement for Non-Profitiable Schools and for Profitable-Schools, school fees can be freely adjusted according to the market conditions. In conclusion, the newly annouced policies stated above only affect compulsory education. The guideline of standardizing private schools for compulsory education《關於規範民辦義務教育發展的實施意見》 once again emphasized that compulsory education can only be held on a non-profit basis, which has a negative impact on the future growth of compulsory education schools. In addition, standardizing private schools for compulsory education may potentially increase the capital investments on compulsory schools and hence extending the investment return cycle. However, we believe that for higher education, the contents of the above-mentioned new policies are consistent with those from the Implementing Regulations for the Law for Promoting Private Education of the PRC (Revised Draft) (Draft for Review) 《民促法實施條例（修訂草案）（送審稿）》. Since higher education schools can choose to be profitable, tuition increases and M&A in the future will not be limited by these policies. As a result, the above newly announced education policies have little impact on higher education schools. We still recommend China Kepei (1890.HK). China Kepei's colleges will all choose to be held profitable in the future. Further, The schools of China Kepei are located in Guangdong and Heilongjiang provinces where higher education can set prices independently and without the interference of the Government. Click Here for PDF format...
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