FYI | Oct 11 2019
Pitt Street Research initiates coverage of China-based eLearning SaaS company, Retech Technology.
By Pitt Street Research
China-based Retech Technology ((RTE)), creates and distributes e-Learning solutions to corporates such as Mercedes, McDonald’s and Huawei. RTE is one of China’s leading online training program providers leveraging its technology to deliver these solutions across platforms, i.e. the Internet, mobile phones, and social media.
Entry into new verticals to leverage existing IP
RTE has recently acquired a Melbourne-based language school to leverage its existing knowledge of live-streaming classes. Through its new joint venture (JV), RTE has expanded into new geographies beyond China. It is also developing a Software-as-a-Service (SaaS)-based, subscription-only platform for Environmental, Social, and Corporate Governance (ESG) courseware.
The new verticals and regions are expected to provide a significant revenue jump, with an expected 5-year Compound Annual Growth Rate (CAGR) of 11% in the global e-Learning industry.
Operational synergies to drive margin expansion
As RTE leverages existing content for new corporate clients, its platform for SaaS services and technology (Intellectual Property (IP)) for live-streaming operations, it is expected to drive operational synergies and profitability.
Valuation range of $1.19–1.49 per share
We have valued RTE at $1.19 per share in our base case and $1.49 in an optimistic case, using a blend of DCF and relative valuation. Our assumptions are based on an increase in repeat projects using existing tech for expansion across new verticals and the inclusion of a subscription-based revenue stream via the ESG vertical.
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