NetDragon (777.HK): International Education Business Going Well; Acquiring A US Education Online Platform May 23, 2018 446

Investment Summary

Recently, Netdragon acquires an international education website EDMODO. We highlight that education business steps up with lowering loss and wining domestic and overseas tenders. We expect mobile games to contribute to stable growth of game segment. Based on our growth assumption and industry valuation, we give education segment target PS 3x, game business target PE 11.3x, thus derive TP of HKD35.71. (Closing price at 18 May 2018)

Business Overview

Acquiring international education online platform. The company announced the acquisition of EDMODO with a consideration of USD137.5mn. EDMODO is a global education online platform to K-12 schools targeting teachers, students, administrators and parents. The EDMODO network enables teachers to share resources, distribute quizzes and assignments, and connect with students, colleagues, and parents. Its registered users amounted to 90mn with 6mn DAU covering 192 countries. EDMODO now starts monetization through advertising, given advertisement revenue reached USD1mn in 2017. We are positive on the synergies among Netdragon`s current products (education software and hardware) and EDOMODO`s large user base, which is believed to form great monetization potential in future.

About the author

Profile photo of Eurus Zhou

Eurus Zhou
Phillip Securities (HK)

Graduated from Hong Kong Polytechnic University, Master of Finance (Investment Management). Possess bachelor degree majoring in Financial Management from Southwestern University of Finance and Economics. Focus on industry prospect and corporate fundamentals to explore investment value and cover pharmaceutical and consumer industry.

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