Overseas Chinese Equities, Aequitas Research

Ming Lu

A veteran with 19-year experience in equity research.

Geographical coverage:
* Companies operating in China, but listed in Hong Kong and the U.S.
* Previously China A-share (listed in mainland China).

Equity sector coverage:
* Chinese App / Internet-based consumption in China, e.g., Alibaba, Tencent, etc.
* Previously covered education, transportation, telecom, power, bank, advertisement, hotel, etc.

Research methods:
* Generally bottom-up.
* Talk to related people on the ground.  Talk to readers and independent writers for analyzing a news portal.  Talk to parents and teachers for analyzing a tutoring school. 
* Visit stores and show photos as evidence in notes.
* Do technical analysis when finding a short-seller attacking an equity.

Languages:
* English
* Mandarin Chinese (Official language of China)
* Shanghainese (Language of Shanghai, the most developed city in China)
* Cantonese (Language of Hong Kong and Canton Province, one of the most developed provinces in China)

Overseas Chinese Equities

Tencent Music (TME): Risks Lower Growth for Both Business Lines, 21% Downside

Tencent Music (TME) Earnings Preview: No Exclusive Advantage, Overvalued

China Internet Weekly (16Mar2020): IKEA Goes to Alibaba and Gome Appliance Goes to JD.com

Tencent Music 1Q19 Results Quick Take and the Looming US$4.85bn Lock-Up Overhang

Tencent Music (TME): Paying User Growth Tumbled in Both Business Lines, 32% Downside

Tencent Music (TME): Lower Margin in 2Q2019, Overvalued as Always

Equity Bottom-Up

<ul>
<li>TME is reported under an anti-trust investigation by the State Administration for Market Regulation (SAMR).</li>
<li>TME almost monopolizes both music copyrights and online music platforms in China.</li>
<li>The Company has exclusive contracts with top-three global music companies.</li>
<li>We believe TME has a downside of 23% even without the anti-trust investigation, as the operating margin declined to 15% in 2Q19 versus 21% in 2Q18.</li>
<li>We believe the copyright business is worth at least USD2.80 per share of the total value of USD10.80 per share.</li>
</ul>


TME is reported under an anti-trust investigation by the State Administration for Market Regulation (SAMR).
TME almost monopolizes both music copyrights and online music platforms in China.
The Company has exclusive contracts with top-three global music companies.
We believe TME has a downside of 23% even without the anti-trust investigation, as the operating margin declined to 15% in 2Q19 versus 21% in 2Q18.
We believe the copyright business is worth at least USD2.80 per share of the total value of USD10.80 per share.


Tencent Music (TME): Anti-Trust Investigation May Take at Least USD2.80 Per Share