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): Less Attractive than Other Entertainments

China Internet Weekly (Feb 22): Kuaishou VP Arrested, BABA Manager Dead “by Accident”, & Q4 Results

China Internet Weekly (Mar 8): New Law Limits BABA & Tencent’s Loan Biz, BIDU Starts Car Production.

Tencent Music (TME): In Q1, Revenues Slowed Down, But Won Users from Competitors, Upgrade to Hold

Tencent Music (TME): The Profit Source Still Weak in 2Q20, Downgrade to Sell

Tencent Music (TME) Q4: Strong in Both Business Lines, But Overvalued as Monopolist

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 class="">
<li>The real main business, social entertainment, continued to recover in 3Q20.</li>
<li>Music, as the nominal main business, is facing a mature market.</li>
<li>TME’s largest entertainment platform, Kugou, stopped paying basic salary to live broadcasters; therefore, we believe the margins will prove in 2021.</li>
<li>The downside has narrowed from 28% to 2%. We believe the stock is fairly valued now.</li>
</ul>


The real main business, social entertainment, continued to recover in 3Q20.
Music, as the nominal main business, is facing a mature market.
TME’s largest entertainment platform, Kugou, stopped paying basic salary to live broadcasters; therefore, we believe the margins will prove in 2021.
The downside has narrowed from 28% to 2%. We believe the stock is fairly valued now.


Tencent Music (TME): Real Main Business Continued to Recover in 3Q20, Downside Has Narrowed