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Back to the Future #2: NetDragon Websoft

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Back to the Future #2: NetDragon Websoft

Can I have the cake and eat it too?

Ong Wee Hiang
Jan 20, 2022
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Back to the Future #2: NetDragon Websoft

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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!

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NetDragon Websoft
We took Darroy in as an intern during the pandemic. The main reason was to get the Darroy to write some introductory articles for us. After knowing that he is into gaming, we started to get him to educate us on the history of gaming from arcade to console, from PC to mobile…
Read more
3 years ago · Ong Wee Hiang

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?

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Industry Update: NetDragon Websoft
We had started buying NetDragon Websoft (ND) at HKD 17.42 and had proceeded to average down till HKD 16.58. We have taken our foot off the pedal when the share price went up to HKD 18+. Please see our first report on ND here (behind paywall). In our…
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2 years ago · Ong Wee Hiang

In March 2021, I wrote about the increased political pressure on the tuition sector and ponder on how would that affect ND.

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Company Update: NetDragon Websoft 20204Q
Ok, for the uninitiated, NetDragon Websoft (ND) does not build spaceship or the event entertainment space. To understand more about ND, please read our initial investment thesis (18th October 2020) and the subsequent update on our thoughts on the online education industry - …
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2 years ago · Ong Wee Hiang

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!

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Company Update: NetDragon 2021 2Q
The theory of NetDragon (ND) is that the market valuation is wrong! That is a big statement to make and I think I may just be correct. Their gaming segment would have account for their current valuation and we can treat the whole education segment as an option/margin of safety…
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2 years ago · Ong Wee Hiang

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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Back to the Future #2: NetDragon Websoft

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