After sharing its 2023 annual report, Visionary Education Technology Holdings Group Inc. (Nasdaq: VEDU) plummeted which could be attributed to defaulting on a $44 million mortgage. That said, the drop could be an overreaction as the stock could be undervalued at current levels. The reason why the stock could be considered undervalued is that the company is set to sell 2 office buildings for $18.7 million by August 31. With a market cap of only $10.5 million, VEDU stock could be poised to run ahead of the completion of the sale transactions which could make it a bargain at its current PPS.
VEDU Stock News
New CEO, New Direction?
Earlier in June, VEDU announced the appointment of its new CEO, Ms. Fan Zhou, who has over 20 years of experience in international vocational education in Canada and China. After the announcement, VEDU stock rose almost 12%, which shows investors’ confidence in the new CEO.
The change in VEDU’s CEO could signal a new direction for the company as it could lean more into AI-powered educational platforms, especially after acquiring Shanghai Jinhuiercheng Technology – a Chinese-based AI-powered educational platform.
In this way, VEDU stock could be considered one of the promising AI stocks given the substantial potential of AI in education. It is probable that for this reason, investors are starting to take notice of VEDU – with the stock climbing to the top of StockTwits’ watchers list.
Targeting New Customers
Furthermore, VEDU is collaborating with high-profile institutions in an attempt to target new segments in the education field. Earlier this year, VEDU entered into a collaboration with the John Hughes Institute to expand MTM College’s curriculum with new majors in visual effects, virtual production, and visual communication.
VEDU also expressed interest in establishing an Olympic high school and had a fruitful meeting with the Chairman of the IOA. If VEDU is successful in establishing its Olympic International High School, which would be Canada’s first Olympic high school, the company could gain a lot of traction from aspiring Canadian Olympic athletes.
Considering the company’s AI capabilities, VEDU could be on track to offer a unique educational product that may allow it to substantially grow its revenues in the future. As more investors are taking notice of the company and its potential, VEDU stock could be poised to run this week – making it one to watch closely.
Another Run In The Making
Currently, VEDU is trading near a major support at $.4 which the stock previously bounced off to make major runs. Earlier this month, VEDU ran more than 36% and 70% after testing this level. With the company gaining investors’ attention due to its AI capabilities, VEDU could be well-positioned to replicate its recent runs as more and more investors take notice of the company and its potential.
*updated August 24, 2023
Promising Asset Sale
In July 2023 VEDU received an offer to acquire 2 of its office buildings located in Markham Canada for C$25.3 million or $18.71 million which it intends to execute on August 31. This is extremely significant since the company’s current market cap is valued at $10.5 million. Once this transaction is completed, the company is expected to make around $4.5 million in net proceeds from the sale of just two of its assets which is almost half of its market cap. This indicates that the company is likely extremely undervalued at its current price. Taking that into consideration, going long on VEDU stock in anticipation of the stock price reflecting the company’s true worth could prove to be a profitable decision.
At first glance, the company’s liabilities may seem treacherous due to the company’s $80 million in current liabilities which is mostly due to a $47 million in banking loans from the Bank of China (BOC). The reason its current liabilities are so high is because the company entered into a mortgage agreement worth $3.69 million which was unauthorized. In this way, the company was in default with the terms of its BOC mortgage which led the bank to demand the entire loan to be repaid.
That said, the company intends to pay back the unauthorized mortgage agreement by the end of September to reinstate BOC’s old loan terms which means that the majority of the $47 million will move to the company’s long-term liabilities. With a low float of 4 million and minimal risk of dilution, VEDU stock could be an attractive investment at current levels.
VEDU Stock Financials
H1 2023 Report
In its first half of 2023 report, VEDU’s assets increased 160% sequentially from $36 million to $93.9 million, and its cash and cash equivalents decreased 70% sequentially from $741 thousand to $222 thousand. VEDU’s total liabilities increased by 150% sequentially from $32 million to $80 million.
Revenue also increased 18% YoY from $1.1 million to $1.3 million. Operating costs increased almost 102% from $0.878 million to $1.78 million, which contributed to the operating loss increase of 185% YoY from $875 thousand in operating income to $746 thousand in operating loss. As a result, VEDU reported a net loss of $2.6 million – a 534% increase YoY.
2023 Annual Report
According to the company’s 2023 annual report, its assets increased dramatically YoY from $36 million to $96 million. This was mainly due to an increase in Property, plant, and equipment which spiked in value from $23.2 million to $69.5 million due to the company expanding its real estate holdings. On that note, due to mortgages related to the company’s aforementioned properties, the company’s current liabilities surged from $13.2 million to $80.4 million, which caused its total liabilities to skyrocket from $32.5 million to $83.4 million.
When it comes to revenue the company experienced a YoY increase from $5.2 million to $8.4 million. This is because of a substantial increase in revenue from rent which grew annually from $2.2 million to $7 million. Meanwhile, the company’s cost of revenue increased from $2.6 million to $3.7 million which led its gross profit to come in at $3.7 million. That said, VEDU’s operating costs increased due to increasing its operations from $1.5 million to $3.3 million which contributed to its net loss growing from $56.4 thousand to $3.5 million.
Media Sentiment
@AngryRed316 is bullish on VEDU’s chart.
@MajorGainz7 is adding VEDU ahead of its anticipated asset sale.
Technical Analysis
VEDU stock is in a bearish trend as it is trading in a downward channel. Looking at the indicators, the stock is trading above the 50 and 21 MAs which is a bullish indication, and is below the 200 MA which is a bearish indication. Meanwhile, the RSI is neutral at 63 and the MACD is neutral as well.
As for the fundamentals, VEDU’s upcoming assets sale for $18 million is a major catalyst for the stock as it indicates that the company is extremely undervalued since the selling price for both office buildings is nearly double its market cap. With the stock holding the 21 MA support, investors could enter long positions on retests of that support ahead of its upcoming catalyst.
VEDU Stock Forecast
As the company is preparing to finalize the sale of 2 assets for nearly double its market, VEDU stock could be set to run over the coming weeks ahead of this catalyst. The significance of this asset sale is that it shows that the stock may be extremely undervalued at current levels. Considering that the company is set to receive around $4.8 million in net proceeds from the sale of the 2 office buildings, it could use these funds to further grow its operations which would improve its outlook greatly. In light of this, bullish investors could find the current PPS an opportunity to go long on the stock.
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