After a Strong Year, Here Are Tiger Pacific’s Most Bullish Picks Heading Into 2018

Even though SINA Corp (NASDAQ:SINA)‘s shares returned over 60% last year, Tiger Pacific apparently sees more room to growth, as it boosted the position in the company by more than 110% over the quarter to 264,194 shares worth $26.50 million heading into 2018. Aside from Tiger Pacific, there were 33 funds long SINA Corp (NASDAQ:SINA) at the end of 2017, compared to 30 funds in our database that had held shares a quarter earlier.

The stock of the Chinese online media company is already 18% in the green year-to-date, mainly on the back of a strong fourth-quarter report, which came above expectations and showed a 61% revenue growth. SINA Corp (NASDAQ:SINA) also improved its gross margins to 75% from 70% and advertising gross margin to 76% from 72%. The stock also got a boost from Weibo Corp (ADR) (NASDAQ:WB), a social media company that was spun-off from SINA Corp (NASDAQ:SINA) and in which SINA owns an 11% stake. Weibo reported an excellent fourth quarter with better-than-expected top and bottom lines and a threefold increase in net income, and provided first-quarter revenue guidance well above the consensus.

The other company in which Tiger Pacific Capital more than doubled its stake is Bitauto Hldg Ltd (ADR) (NYSE:BITA), an online provider of content and marketing services for the automotive industry in China. During the fourth quarter, Tiger Pacific Capital added 233,444 shares to its stake, taking it to 358,180 shares valued at $11.39 million, after having initiated a position a quarter earlier. Bitauto Hldg Ltd (ADR) (NYSE:BITA)’s stock lost over 28% during the last quarter of 2017, amid a third-quarter report that included better-than-expected EPS and revenue, but also showed a wider net loss due to options granted by Yixin to its employees during the third quarter. Yixin is the largest online car retailer in China, which was spun-off from Bitauto Hldg Ltd (ADR) (NYSE:BITA) in 2014, but kept a controlling stake, with Tencent Holdings and JD.Com Inc (ADR) (NASDAQ:JD) also holding 24.3% and 12.7% stakes, respectively.

Now, let’s move on to some of Tiger Pacific Capital’s new positions, the largest of which is in TAL Education Group (ADR) (NYSE:TAL). Between October and December, Tiger Pacific acquired 500,300 shares of the company worth $14.86 million, which makes it the fourth-largest position in the fund’s equity portfolio. The investment seems to be already paying off, since TAL Education Group (ADR) (NYSE:TAL) has appreciated by nearly 30% since the beginning of the year. TAL Education Group (ADR) (NYSE:TAL)’s fiscal third-quarter EPS and revenue were above the consensus, with revenue also growing by 66% to $433.30 million on the back of an 85% increase in student enrollment to approximately 1.54 million. For the current quarter, TAL Education Group (ADR) (NYSE:TAL) expects revenue in the range of $474.5 million to $480.8 million, which indicates annual growth between 50% and 52%.

Tiger Pacific also initiated a stake in another education services provider, Four Seasons Edu (Cayman) Inc ADR (NYSE:FEDU), in which it disclosed a $6.61 million stake containing 733,887 shares. Four Seasons Edu (Cayman) Inc ADR (NYSE:FEDU) is the largest after-school math education service provider for elementary school students in Shanghai and its stock conducted its US IPO in November. Since it went public, the stock is down by over 23%, probably signaling a cool down in investor interest towards Chinese education services providers. According to FT, in 2017, there were at least seven private education service companies that went public, four of which listed in the US, including Four Seasons Edu (Cayman) Inc ADR (NYSE:FEDU). The Chinese private education industry is very large and mostly fragmented with many companies acting as regional players. Four Seasons Edu (Cayman) Inc ADR (NYSE:FEDU) make take advantage of this opportunity and expand beyond Shanghai and get involved in other areas of STEAM (Science, Technology, Engineering, Arts and Mathematics) education.

Disclosure: none