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.

Equity Bottom-Up

<ul>
<li>Alibaba (BABA) reopened the Freshippo store where an employee tested positive of coronavirus.</li>
<li>Alibaba (BABA) will raise its stake in YTO (600233 CN) from 10.5% to 22.5%.</li>
<li>India banned Tencent (700 HK)’s game, PUBG Mobile Lite.</li>
<li>GSX Edutech (GSX)’s revenue increased by 367% YoY in 2Q20.</li>
</ul>


Alibaba (BABA) reopened the Freshippo store where an employee tested positive of coronavirus.
Alibaba (BABA) will raise its stake in YTO (600233 CN) from 10.5% to 22.5%.
India banned Tencent (700 HK)’s game, PUBG Mobile Lite.
GSX Edutech (GSX)’s revenue increased by 367% YoY in 2Q20.


China Internet Weekly (7Sep2020): BABA Re-Opened Freshippo Stores, India Banned Tencent’s Top Game

APAC IPOs & Placements

Zhen Zhou, Toh

Event-Driven

<div>
<p><a href="https://www.smartkarma.com/entities/gsx-techedu-inc" target="_blank" data-smartkarma-citation="entities:28069:1" rel="noopener">GSX Techedu (GSX US)</a> reported its Q2 FY2020 results last night. Despite posting strong growth, share priced tanked last night as the company mentioned that it is facing an investigation by the SEC after numerous allegations from short-sellers.</p>
<p>In this note, we will briefly discuss Q2 results, things we've observed and share our thoughts on valuation.</p>
<p>We had discussed about GSX in our previous notes: </p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/muddy-waters-short-sell-report-on-gsx-techedu-cfo-s-explanation-helped" target="_blank" data-smartkarma-citation="insights:39513" rel="noopener">Muddy Waters Short Sell Report on GSX Techedu (跟谁学) - CFO's Explanation Helped</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/gsx-techedu-short-sell-reports-what-now" target="_blank" data-smartkarma-citation="insights:39160" rel="noopener">GSX Techedu (跟谁学) Short Sell Reports - What Now?</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/gsx-techedu-short-sell-report-quick-take-ball-is-already-back-in-citron-s-court" target="_blank" data-smartkarma-citation="insights:38441" rel="noopener">GSX Techedu (跟谁学) Short Sell Report Quick Take - Ball Is Already Back in Citron's Court</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/what-might-have-happened-at-luckin-coffee-trade-ideas-and-implication-for-other-adrs" target="_blank" data-smartkarma-citation="insights:38099" rel="noopener">What Might Have Happened at Luckin Coffee (瑞幸咖啡) + Trade Ideas and Implication for Other ADRs</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/tal-inflated-sales-quick-take-small-rev-contribution-large-impact" target="_blank" data-smartkarma-citation="insights:38247" rel="noopener">TAL Inflated Sales Quick Take - Small Rev Contribution, Large Impact</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/new-analysis-on-gsx-s-numbers-more-evidence-but-share-price-is-now-2x-from-may-low" target="_blank" data-smartkarma-citation="insights:40892" rel="noopener">New Analysis on GSX's Numbers - More Evidence but Share Price Is Now 2x from May Low</a> </li>
</ul>
</div>


GSX Techedu (GSX US) reported its Q2 FY2020 results last night. Despite posting strong growth, share priced tanked last night as the company mentioned that it is facing an investigation by the SEC after numerous allegations from short-sellers.
In this note, we will briefly discuss Q2 results, things we've observed and share our thoughts on valuation.
We had discussed about GSX in our previous notes: 




Muddy Waters Short Sell Report on GSX Techedu (跟谁学) - CFO's Explanation Helped 

GSX Techedu (跟谁学) Short Sell Reports - What Now? 

GSX Techedu (跟谁学) Short Sell Report Quick Take - Ball Is Already Back in Citron's Court 

What Might Have Happened at Luckin Coffee (瑞幸咖啡) + Trade Ideas and Implication for Other ADRs 

TAL Inflated Sales Quick Take - Small Rev Contribution, Large Impact 

New Analysis on GSX's Numbers - More Evidence but Share Price Is Now 2x from May Low 



GSX Q2 Results and SEC Probe Quick Take - Improved Disclosure but Still Looks Expensive

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Equity Capital Markets

<p>In the presentation we analyze the similarities and differences between what is happening in Chinese stock market and what happened five years ago, in terms of liquidity, margin lending, the role played by the policy goals, and global geopolitical trends.</p>

In the presentation we analyze the similarities and differences between what is happening in Chinese stock market and what happened five years ago, in terms of liquidity, margin lending, the role played by the policy goals, and global geopolitical trends.

<p>Muddy Waters published an anonymous report on the analysis of student number of GSX classes. We will take a look at the analysis in the report and share our thoughts of the report and valuation. </p>
<div>
<p>We had talked about GSX in our previous notes: </p>
</div>
<div>
<ul>
<li>
<a href="https://www.smartkarma.com/insights/muddy-waters-short-sell-report-on-gsx-techedu-cfo-s-explanation-helped" target="_blank" data-smartkarma-citation="insights:39513" rel="noopener">Muddy Waters Short Sell Report on GSX Techedu (跟谁学) - CFO's Explanation Helped</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/gsx-techedu-short-sell-reports-what-now" target="_blank" data-smartkarma-citation="insights:39160" rel="noopener">GSX Techedu (跟谁学) Short Sell Reports - What Now?</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/gsx-techedu-short-sell-report-quick-take-ball-is-already-back-in-citron-s-court" target="_blank" data-smartkarma-citation="insights:38441" rel="noopener">GSX Techedu (跟谁学) Short Sell Report Quick Take - Ball Is Already Back in Citron's Court</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/what-might-have-happened-at-luckin-coffee-trade-ideas-and-implication-for-other-adrs" target="_blank" data-smartkarma-citation="insights:38099" rel="noopener">What Might Have Happened at Luckin Coffee (瑞幸咖啡) + Trade Ideas and Implication for Other ADRs</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/tal-inflated-sales-quick-take-small-rev-contribution-large-impact" target="_blank" data-smartkarma-citation="insights:38247" rel="noopener">TAL Inflated Sales Quick Take - Small Rev Contribution, Large Impact</a> </li>
</ul>
</div>

Muddy Waters published an anonymous report on the analysis of student number of GSX classes. We will take a look at the analysis in the report and share our thoughts of the report and valuation. 

We had talked about GSX in our previous notes: 




Muddy Waters Short Sell Report on GSX Techedu (跟谁学) - CFO's Explanation Helped 

GSX Techedu (跟谁学) Short Sell Reports - What Now? 

GSX Techedu (跟谁学) Short Sell Report Quick Take - Ball Is Already Back in Citron's Court 

What Might Have Happened at Luckin Coffee (瑞幸咖啡) + Trade Ideas and Implication for Other ADRs 

TAL Inflated Sales Quick Take - Small Rev Contribution, Large Impact 



New Analysis on GSX's Numbers - More Evidence but Share Price Is Now 2x from May Low

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<p>Baidu-backed online education startup, Zuoyebang, just raised US$750mn in its Series E giving it a valuation north of US$6.5bn. This happened just three months after its rival, Yuanfudao, raised US$1bn in its Series G giving it a valuation of US$7.8bn.</p><p>We see the private market's optimism towards the online education sector as a positive sign that the structural shift towards digitizing education is only just beginning. </p><p>In light of this, we raise our fair value estimates on Youdao to US$48.2, representing 29% upside from today's prices. We believe this is fair given that:</p><ol>
<li>Youdao is a pure digital play - warranting a premium compared to brick &amp; mortar hybrids</li>
<li>Youdao has many value levers it has yet to pull - a large base of free users to monetize and operating leverage from scale</li>
<li>Youdao is still in the early stages of its growth. Had it stayed a private company, it would likely have received higher and higher valuations at every funding stage similar to what Zuoyebang and Yuanfudao are currently enjoying.</li>
</ol>

Baidu-backed online education startup, Zuoyebang, just raised US$750mn in its Series E giving it a valuation north of US$6.5bn. This happened just three months after its rival, Yuanfudao, raised US$1bn in its Series G giving it a valuation of US$7.8bn.We see the private market's optimism towards the online education sector as a positive sign that the structural shift towards digitizing education is only just beginning. In light of this, we raise our fair value estimates on Youdao to US$48.2, representing 29% upside from today's prices. We believe this is fair given that:
Youdao is a pure digital play - warranting a premium compared to brick &amp; mortar hybrids
Youdao has many value levers it has yet to pull - a large base of free users to monetize and operating leverage from scale
Youdao is still in the early stages of its growth. Had it stayed a private company, it would likely have received higher and higher valuations at every funding stage similar to what Zuoyebang and Yuanfudao are currently enjoying.


Youdao: VC Investments in Online Learning Validate Robust Growth Outlook, Raise FV to US$48.2 (+29%)

China

Gaotu Techedu inc develops educational software. The Company offers online K-12 large class after school tutoring as well as foreign language, professional and other courses. Gaotu Techedu serves students in China

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Gaotu Techedu (GOTU US)

China Internet Weekly (7Sep2020): BABA Re-Opened Freshippo Stores, India Banned Tencent’s Top Game

Alibaba (BABA) reopened the Freshippo store where an employee tested positive of coronavirus. Alibaba (BABA) will raise its stake in YTO (600233...

Ming Lu

GSX Q2 Results and SEC Probe Quick Take - Improved Disclosure but Still Looks Expensive

We had talked about GSX in our previous notes: Muddy Waters Short Sell Report on GSX Techedu (跟谁学) - CFO's Explanation Helped GSX Techedu...

Zhen Zhou, Toh

Comparing the China Bulls: 2020 Vs 2015

In the presentation we analyze the similarities and differences between what is happening in Chinese stock market and what happened five years ago,...

JL Warren Capital

Youdao: VC Investments in Online Learning Validate Robust Growth Outlook, Raise FV to US$48.2 (+29%)

Baidu-backed online education startup, Zuoyebang, just raised US$750mn in its Series E giving it a valuation north of US$6.5bn. This happened just...

Vincent Fernando, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Internet Weekly (7Sep2020): BABA Re-Opened Freshippo Stores, India Banned Tencent’s Top Game

Alibaba (BABA) reopened the Freshippo store where an employee tested positive of coronavirus. Alibaba (BABA) will raise its stake in YTO (600233...

Ming Lu

GSX Q2 Results and SEC Probe Quick Take - Improved Disclosure but Still Looks Expensive

We had talked about GSX in our previous notes: Muddy Waters Short Sell Report on GSX Techedu (跟谁学) - CFO's Explanation Helped GSX Techedu...

Zhen Zhou, Toh

Comparing the China Bulls: 2020 Vs 2015

In the presentation we analyze the similarities and differences between what is happening in Chinese stock market and what happened five years ago,...

JL Warren Capital

New Analysis on GSX's Numbers - More Evidence but Share Price Is Now 2x from May Low

Muddy Waters published an anonymous report on the analysis of student number of GSX classes. We will take a look at the analysis in the report and...

Zhen Zhou, Toh

Youdao: VC Investments in Online Learning Validate Robust Growth Outlook, Raise FV to US$48.2 (+29%)

Baidu-backed online education startup, Zuoyebang, just raised US$750mn in its Series E giving it a valuation north of US$6.5bn. This happened just...

Vincent Fernando, CFA