The feeling of Déjà vu.
The thesis is the same and it looks like an even better trade now.
This is a company who owns a couple of antique PC games franchise and some global EdTech solutions too.
Yes, I am going to continue rehashing an old ideas here.
So prepare to go back in time and then possibly to boldly go where no man has gone before.
NetDragon Websoft (ND):
The story started long ago when I read about a gaming company which went into education. The story seems shaky as there are often times that the business looks and smell like a fraud.
The pandemic and a re-reading of all their annual reports changed my perspective and I have a new found appreciation of gaming and their EdTech division.
It seems that I could have the cake (EdTech) and eat it (Gaming) too!
The China EdTech business kept burning money and growing. Looking at the various businesses, ND’s global and more diversified B2G, B2B EdTech business would be more valuable than those cash burning outfit?
In March 2021, I wrote about the increased political pressure on the tuition sector and ponder on how would that affect ND.
Instead, I should have went ahead and short the Chinese education sector.
This is how Gotu stock looks like since then…
The announcement of share buyback, a higher dividend and plans to list their EdTech arm seems to have no effect on the share price.
I rehashed my thesis and did some calculation. Everything continues to look good and I want my cake!
The cake dividend announcement by the company is finally out?
By 31st Jan 2022, ND’s board would decide on APPROVING THE DECLARATION AND PAYMENT OF A SPECIAL INTERIM DIVIDEND!
If everything goes as plan (take note that anything unexpected can happen in business and in China), owners of ND would be receiving HKD 1.43. That would be a 7.95%1 dividend yield on HKD 18.
ND will continue to gush out tons of cash for continued buyback while continuing to reinvest in new and existing business.
With the spinoff imminent, I can almost feel that slice of cake in my mouth… and I intend to have that growing cake too!
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I had erroneously put it as 17.875% in my original post.
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