17 Education & Technology Group Inc

17 Education & Technology Group Inc (NASDAQ: YQ) is a provider of education technology services. The Company has an integrated model for in-school and after-school.

Investment Highlights - 17 Education & Technology Group Inc – Speculative Buy at USD 14.22

• The Company has shown significant improvement in net revenue in the first nine months of the financial year 2020, reflecting growth in online K-12 tutoring services.
• In the last one month, the Company delivered a decent return of ~11.01% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, EV/EBITDA, Price/Earnings and Price/Cash Flow multiples of the 17 Education & Technology Group Inc are currently lower as compared to the corresponding multiples of the Personal & Household Products & Services industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 90-day RSI is supporting an upside move (around 43 level), which means the stock price could increase in the short term.

Key Risks

• Failure in cybersecurity and a critical data breach could hamper the operation as well as the reputation of the company.
• The Company’s operations are impacted by risks related to market trends, political change and change in the regulatory authority.

Financial Highlights – 9M FY2020 (30 September 2020) (released on 4 December 2020)

(Source: Quarterly Report, Company Website) 

• For the nine months period of the financial year 2020, driven by an increase in net revenue from online K-12 tutoring services, the net revenue increased to RMB 807,584 thousand (9M FY2019: RMB 213,943 thousand.
• The profitability margins for the period declined, reflecting the higher cost of revenues, R&D expenses, sales and marketing expenses and general and admin expenses.
• The cash balance as on 30 September 2020 stood at RMB 814,085 thousand (31 December 2019: RMB 653,859 thousand).

One Month Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the nine months period of the financial year 2020. Despite the higher revenue, the bottom-line performance declined, while profitability margins remained in the negative zone. The Company needs to manage its operating expenses more effectively unless it will increase loss in coming future. YQ is identified as a leading education technology company in China, and its smart in-school classroom solution provides learning, teaching and assessment products to over 70 thousand K-12 schools. The stock made a 52-week low and high of USD 10.00 and USD 23.93, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on 17 Education & Technology Group Inc at the closing price of USD 14.22 (as on 2 February 2021).

Trevena Inc

Trevena Inc (NYSE: TRVN) is a US-listed biopharmaceutical Company. The Company is engaged in the business of developing and commercialising of novel medicines for patients with CNS (central nervous system) disorders.

Investment Highlights - Trevena Inc – Speculative Buy at USD 2.29

• With the launch of OLINVYK injection, the Company has received multiple inbound interests from institutions and hospital physicians across the US.
• In the last nine months, the Company delivered a significant return of ~157.30% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, EV/Sales multiple of the Trevena Inc is currently lower as compared to the corresponding multiple of the Biotechnology & Medical Research industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 90-day RSI is supporting an upside move (around 49 level), which means the stock price could increase in the short term.

Key Risks

• The market conditions in which the Company operates is full of challenges and might impact the operation performance and reduce financial performance as well.
• Liquidity and interest rate risks could affect the operations of the Company.

Recent News

On 6 January 2021, Trevena announced the commercial launch of OLINVYK injection for in the US market.

Financial Highlights – Q3 and 9M FY2020 (30 September 2020) (released on 2 November 2020)

(Source: Quarterly Report, Company Website) 

• In the third quarter of the financial year 2020, the Company is still in the development stage and generated license revenue for the first time.
• The loss for the period declined, reflecting lower operating expenses and increased revenue.
• The cash balance as on 30 September 2020 stood at $112,682 thousand (31 December 2019: $32,305 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an increase in financial performance in the third quarter and the first nine months period of the financial year 2020. The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities. TRVN generated revenue for the first time in Q3 FY2020. The Bottom-line performance has improved, while profitability remained in the negative zone. The liquidity position improved along with well-positioned balance sheet. Trevena operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening its balance sheet and reducing its costs to preserve cash. The stock made a 52-week low and high of USD 0.46 and USD 3.68, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Trevena Inc at the closing price of USD 2.29 (as on 2 February 2021).

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