East Buy Holdings (HKG: 1797) (OTCPK: KLTHF) are up 5% today. 1797 shares are up against the general trend of the market which is the interesting thing about them. That is, that East Buy’s valuation is not being driven by the general views on the Mainland economy - that disaster that is the property market say - but by a considered evaluation of the company’s own prospects. Given that it is rising when most other large caps are falling is just that evidence of that contention.
It’s also possible to put this another way around, Which is that the Chinese government intervened in the online education market a little while back. That was something of a disaster for share prices in the sector. What’s now happening is that those education companies which can navigate through the new rules are doing well. Those that can’t, well, not so well. This is also a good example of the slightly weird dichotomy of the Chinese economy. That CCP intervention shows that it’s not a free market economy in the usual sense. But the speed of adaptation shows that it is in another and important sense. Yes, there is that political direction. But as long as the political directives are followed then companies can - and do - move with great speed because they’re unencumbered by having to ask for permission to change what they do. Yes, yes, we know, it’s odd to point this out but it is true. Within those broad directives from the centre Chinese firms have much greater freedom of action than those in the West.
East Buy Holdings share price from Google Finance
We’ve looked before at East Buy Holdings: “East Buy Holdings (HK: 01797) (OTCPK: KLTHF) shares are up 10% in Hong Kong today. The background here is that the authorities, a couple of years back, changed the rules in China's online education market. This rather impacted (we can use grosser phrases if we like) upon the plans of many of the players in that market. There were a number of online education providers quoted on NASDAQ for example, all of whom suffered significant share price declines.” East Buy was able to adapt to those changes in the rules.
And more recently about East Buy: “And also noted that East Buy seems to be navigating those changes: “It's this which we think is driving East Buy Holdings shares up. Yes, there were those major changes to the education market a couple of years back. OK, so regroup, do what is allowed to be done and then regain that former growth: “Outstandingly, East Buy Holding's EPS shot from CN¥0.31 to CN¥0.61, over the last year. Year on year growth of 96% is certainly a sight to behold.” We might use slightly different language (being native speakers of English) but yes, that is impressive.””
As we can see from the last 6 months or so of that share price chart it has been rather 2 steps forward, one step back, for East Buy. But the general direction is positive. As we say, we think they’re navigating those forced changes in the marketplace better than many others.
