Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

Equity Bottom-Up

<ul>
<li>The advertising revenues slowed down significantly in 4Q2018.</li>
<li>We believe the content transition from politics to entertainment was not as good as the management expected.</li>
<li>We believe WB will not defeat Tencent’s WeChat.</li>
<li>We believe the stock price has downside of 9%.</li>
</ul>


The advertising revenues slowed down significantly in 4Q2018.
We believe the content transition from politics to entertainment was not as good as the management expected.
We believe WB will not defeat Tencent’s WeChat.
We believe the stock price has downside of 9%.


Weibo (WB): Revenues Slowed Down Significantly in 4Q2018, Failed in Transition

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Independent equity research on GEM Markets

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Thematic (Sector/Industry)

<ul>
<li>Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia's most prominent foreign investors, has been detained.</li>
<li>Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.</li>
<li>South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.</li>
</ul>


Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia's most prominent foreign investors, has been detained.
Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.


RRG Global Macro Weekly - Election Volatility Expected in India, Indonesia and Thailand

Equity Capital Markets

East Buy Holding  / Equity Capital Markets

<ul class="">
<li>Koolearn updated its IPS prospectus and posted operating losses for 1H2019 (ended Nov. 2018).</li>
<li>The company spent significantly on online promotion, but we believe that online promotion is not useful.</li>
<li>We also believe online marketing expenditures are not a productive use of the Company's cash, as Koolearn's brand was already well known among consumers due to its parent company, New Oriental.</li>
</ul>


Koolearn updated its IPS prospectus and posted operating losses for 1H2019 (ended Nov. 2018).
The company spent significantly on online promotion, but we believe that online promotion is not useful.
We also believe online marketing expenditures are not a productive use of the Company's cash, as Koolearn's brand was already well known among consumers due to its parent company, New Oriental.


Koolearn: Marketing Expenses Have Taken Operating Profits Down the Drain

<ul class="">
<li>Baidu's new methodology directs the large majority of search results to its in-house functions, especially to its blog function BJH (百家号).</li>
<li>Baidu began to hide websites of search results after the change above was widely criticized. However, as a result, users can hardly find authoritative websites.</li>
<li>Because of these changes, it is hard for users to find useful content.</li>
<li>We believe Baidu is giving up its existing advantages for users and clients.</li>
<li>We also believe that users will choose to leave if the platform tries to choose content for them. If users leave Baidu, advertisers will follow them.</li>
</ul>


Baidu's new methodology directs the large majority of search results to its in-house functions, especially to its blog function BJH (百家号).
Baidu began to hide websites of search results after the change above was widely criticized. However, as a result, users can hardly find authoritative websites.
Because of these changes, it is hard for users to find useful content.
We believe Baidu is giving up its existing advantages for users and clients.
We also believe that users will choose to leave if the platform tries to choose content for them. If users leave Baidu, advertisers will follow them.


Baidu (BIDU): The Change Amounts to Business Suicide, Disappointing Existing Users and Clients

<ul class="">
<li>The stock price did not decline after 3Q18 results were released. This  is very different from the plunges that the shares saw after the 2Q18 and 1Q18 earnings releases.</li>
<li>Revenue growth slowed down due to the headwind of pressure on online game advertisers, but WB continued to accumulate active users.</li>
<li>We believe that the write-down of goodwill and intangibles will help stabilize operating margin.</li>
<li>A cross-sectional comparison with peers’ P/E ratios suggests that even if the market does not recognize any value for  WB's monopolistic position in news dissemination among strangers, then WB is worth its current stock price.</li>
<li>Upgrade to Buy.</li>
</ul>


The stock price did not decline after 3Q18 results were released. This  is very different from the plunges that the shares saw after the 2Q18 and 1Q18 earnings releases.
Revenue growth slowed down due to the headwind of pressure on online game advertisers, but WB continued to accumulate active users.
We believe that the write-down of goodwill and intangibles will help stabilize operating margin.
A cross-sectional comparison with peers’ P/E ratios suggests that even if the market does not recognize any value for  WB's monopolistic position in news dissemination among strangers, then WB is worth its current stock price.
Upgrade to Buy.


Weibo (WB) - Short Seller Has Left, Little Downside and Significant Upside, Upgrade to Buy

China

Weibo Corp is a social media platform for people to create, distribute and discover Chinese-language content.  The Company offers users public self-expression in real time with a powerful platform for social interaction, as well as content aggregation and distribution.

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Weibo Corp (WB US)

Weibo (WB): Revenues Slowed Down Significantly in 4Q2018, Failed in Transition

The advertising revenues slowed down significantly in 4Q2018. We believe the content transition from politics to entertainment was not as good as...

Ming Lu

RRG Global Macro Weekly - Election Volatility Expected in India, Indonesia and Thailand

Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia's most prominent...

David Riedel

Koolearn: Marketing Expenses Have Taken Operating Profits Down the Drain

Koolearn updated its IPS prospectus and posted operating losses for 1H2019 (ended Nov. 2018). The company spent significantly on online promotion,...

Ming Lu

Baidu (BIDU): The Change Amounts to Business Suicide, Disappointing Existing Users and Clients

Baidu's new methodology directs the large majority of search results to its in-house functions, especially to its blog function BJH (百家号). Baidu...

Ming Lu

Weibo (WB) - Short Seller Has Left, Little Downside and Significant Upside, Upgrade to Buy

The stock price did not decline after 3Q18 results were released. This is very different from the plunges that the shares saw after the 2Q18 and...

Ming Lu

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