Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

Thematic (Sector/Industry)

<ul>
<li>Warren Buffett's dream business, well exemplified by Berkshire's See's Candies, is the one that can deliver a sizable increase in earnings power through minimal capital reinvested;</li>
<li>The quality above is what exactly is missing among most Chinese companies these days, in our opinion;</li>
<li>Nonetheless, we managed to land on three businesses that share such a rare characteristic.</li>
</ul>


Warren Buffett's dream business, well exemplified by Berkshire's See's Candies, is the one that can deliver a sizable increase in earnings power through minimal capital reinvested;
The quality above is what exactly is missing among most Chinese companies these days, in our opinion;
Nonetheless, we managed to land on three businesses that share such a rare characteristic.


Three Chinese Stocks that Meet Warren Buffett's Definition Of "Dream Business"

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2>
<ul>
<li>Evergrande, the world’s most indebted property firm </li>
<li>Stay home, stay safe, spend more</li>
<li>Sell those exports like imports </li>
<li>Chinese firms choose own capital markets</li>
<li>Roaring (quietly) once more, electric vehicles excite China </li>
</ul>
<div class="content-remarks">
<p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p>
</div>

China News That Matters

Evergrande, the world’s most indebted property firm 
Stay home, stay safe, spend more
Sell those exports like imports 
Chinese firms choose own capital markets
Roaring (quietly) once more, electric vehicles excite China 


In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.


Evergrande/ Golden Week/ Economy/ US-China/ Autos

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<div class="content-highlight">
<p>In this insight, we go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to invest in Korean companies about 14 years ago. Most of its big investments in Korea including Krafton Games, <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a>, and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> were made in the past decade. </p>
<p>We also discuss the US government's increasingly hostile stance on Tencent and other major Chinese tech companies and discuss the probabilities of the US government potentially following India's hard-line policy of removing major Chinese apps. </p>
</div>


In this insight, we go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to invest in Korean companies about 14 years ago. Most of its big investments in Korea including Krafton Games, Netmarble Corporation (251270 KS), and Kakao Corp (035720 KS) were made in the past decade. 
We also discuss the US government's increasingly hostile stance on Tencent and other major Chinese tech companies and discuss the probabilities of the US government potentially following India's hard-line policy of removing major Chinese apps. 


Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<div>
<p>Back on the 27 July, Chinese search-engine <a href="https://www.smartkarma.com/entities/sogou-inc" target="_blank" data-smartkarma-citation="entities:25996:1" rel="noopener">Sogou Inc (SOGO US)</a>, majority-owned by <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a>  and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="http://ir.sogou.com/2020-07-27-Sogou-Announces-Receipt-of-a-Preliminary-Non-Binding-Proposal-to-Acquire-the-Company" target="_blank" rel="noopener">announced</a> it has received a preliminary non-binding proposal from Tencent to acquire all of its outstanding ordinary shares that are not already owned by Tencent, for US$9.00 in cash per ordinary share or ADS. The Offer price is a 57% premium to the undisturbed price and a two-year high.</p>
<p>Today Sogou <a href="http://app.quotemedia.com/data/downloadFiling?webmasterId=101533&amp;ref=115257193&amp;type=PDF&amp;symbol=SOGO&amp;companyName=Sogou+Inc.+American+Depositary+Shares+each+representing+one+Class+A&amp;formType=6-K&amp;dateFiled=2020-09-29&amp;CK=1713947" target="_blank" rel="noopener">entered</a> into a definitive agreement for a Going-Private Transaction at the same Offer price of US$9/share.</p>
<p>Separately, <a href="https://www.smartkarma.com/entities/sohu-com-ltd" target="_blank" data-smartkarma-citation="entities:22853:1" rel="noopener">Sohu.com Inc (SOHU US)</a> has entered into a share purchase agreement with Tencent concerning its stake in Sogou, the completion of which will result in Tencent holding not less than 90% of the voting power in Sogou.</p>
</div>
<div>
<p>Therefore the Merger will be in the form of a short-form merger as per section 233(7) of the <em><a href="https://www.cima.ky/upimages/commonfiles/CompaniesLaw2020Revision_1579811065.pdf" target="_blank" rel="noopener">Companies Law of the Cayman Islands</a></em> - there is no vote. There are no dissenting rights.</p>
<p>Done deal - the Merger is expected to close in the fourth quarter of 2020.</p>
</div>
<div>
<p>More below the fold.</p>
</div>


Back on the 27 July, Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US)  and Tencent Holdings (700 HK), announced it has received a preliminary non-binding proposal from Tencent to acquire all of its outstanding ordinary shares that are not already owned by Tencent, for US$9.00 in cash per ordinary share or ADS. The Offer price is a 57% premium to the undisturbed price and a two-year high.
Today Sogou entered into a definitive agreement for a Going-Private Transaction at the same Offer price of US$9/share.
Separately, Sohu.com Inc (SOHU US) has entered into a share purchase agreement with Tencent concerning its stake in Sogou, the completion of which will result in Tencent holding not less than 90% of the voting power in Sogou.


Therefore the Merger will be in the form of a short-form merger as per section 233(7) of the Companies Law of the Cayman Islands - there is no vote. There are no dissenting rights.
Done deal - the Merger is expected to close in the fourth quarter of 2020.


More below the fold.


Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>Baidu (BIDU)’s manager was arrested for gambling advertisements.</li>
<li>iQiyi (IQ) was banned in Taiwan.</li>
<li>Trip.com (TCOM)’s revenue continued to decrease QoQ in 2Q20.</li>
<li>China Literature (772 HK) raised novel writers’ revenue share from 50% to 70%.</li>
</ul>


Baidu (BIDU)’s manager was arrested for gambling advertisements.
iQiyi (IQ) was banned in Taiwan.
Trip.com (TCOM)’s revenue continued to decrease QoQ in 2Q20.
China Literature (772 HK) raised novel writers’ revenue share from 50% to 70%.


China Internet Weekly (28Sep2020): BIDU Manager Arrested, TCOM Revenue Shrank QoQ

China

Baidu, Inc. operates an Internet search engine. The Company offers algorithmic search, enterprise search, news, MP3, and image searches, voice assistance, online storage, and navigation services. Baidu serves clients globally.

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Baidu (BIDU US)

Three Chinese Stocks that Meet Warren Buffett's Definition Of "Dream Business"

We have developed two primary metrics to gauge the "dream business" quality of business: i.e., the return on retained earnings and the incremental...

Steven Chen

Evergrande/ Golden Week/ Economy/ US-China/ Autos

China News That Matters

Diana Choyleva

Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

We go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to...

Douglas Kim

Sogou/Tencent: And That's A Wrap

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US) and Tencent Holdings (700 HK), has announced it has received...

David Blennerhassett

China Internet Weekly (28Sep2020): BIDU Manager Arrested, TCOM Revenue Shrank QoQ

Baidu (BIDU)’s manager was arrested for gambling advertisements. iQiyi (IQ) was banned in Taiwan. Trip.com (TCOM)’s revenue continued to decrease...

Ming Lu

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Three Chinese Stocks that Meet Warren Buffett's Definition Of "Dream Business"

We have developed two primary metrics to gauge the "dream business" quality of business: i.e., the return on retained earnings and the incremental...

Steven Chen

Evergrande/ Golden Week/ Economy/ US-China/ Autos

China News That Matters

Diana Choyleva

Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

We go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to...

Douglas Kim

Sogou/​Tencent: And That's A Wrap

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Sohu.com Inc (SOHU US) and Tencent Holdings (700 HK), has announced it has received...

David Blennerhassett

China Internet Weekly (28Sep2020): BIDU Manager Arrested, TCOM Revenue Shrank QoQ

Baidu (BIDU)’s manager was arrested for gambling advertisements. iQiyi (IQ) was banned in Taiwan. Trip.com (TCOM)’s revenue continued to decrease...

Ming Lu

Sogou/Tencent: And That's A Wrap