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 Bottom-Up

<a href="https://www.smartkarma.com/entities/26075" target="_blank" data-smartkarma-citation="entities:26075:1">Momo Inc (MOMO US)</a> stock trades on sequential growth of MAU. Without showing steady growth of MAU, stock’s valuation will come down to 10x 2018E down from mid-teen currently.  We believe that MAU will be volatile in the foreseeable future until TANTAN synergy is demonstrated likely at the end of 2018, in perhaps at the end of 2018.  At 10x P/E multiple, assuming ~500 mm USD net profit this year, our PT is ~24 USD, ~30% downside from current price of 35USD per share when and if company’s MAU stopped growing.

Momo Inc (MOMO US) stock trades on sequential growth of MAU. Without showing steady growth of MAU, stock’s valuation will come down to 10x 2018E down from mid-teen currently.  We believe that MAU will be volatile in the foreseeable future until TANTAN synergy is demonstrated likely at the end of 2018, in perhaps at the end of 2018.  At 10x P/E multiple, assuming ~500 mm USD net profit this year, our PT is ~24 USD, ~30% downside from current price of 35USD per share when and if company’s MAU stopped growing.

China's Live Streaming: A Fab Vulnerable to Cyberspace Content Scrutiny

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

<ul class=""><li>Stock price surged after Q1 result release, closed about 10% over two weeks before when we posted our last buy suggestion. But we believe there is still 35% upside, at least.</li><li>We value Baidu by a straightforward P/E band, but iQiyi, without complete data, may bring additional value.</li><li>Search engine margin improved 13 ppt yoy.</li><li><a href="https://www.smartkarma.com/entities/26755" target="_blank" data-smartkarma-citation="entities:26755:1">iQIYI Inc (IQ US)</a> accelerated the general revenue growth to 24% yoy from 18% yoy for Baidu Core only.</li></ul>

Stock price surged after Q1 result release, closed about 10% over two weeks before when we posted our last buy suggestion. But we believe there is still 35% upside, at least.We value Baidu by a straightforward P/E band, but iQiyi, without complete data, may bring additional value.Search engine margin improved 13 ppt yoy.iQIYI Inc (IQ US) accelerated the general revenue growth to 24% yoy from 18% yoy for Baidu Core only.

BIDU – Break Down Q1 into Search Engine and IQiyi, Upside At Least 35%

Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

Riedel Research

Riedel provides equity research and analysis to leading financial organizations. By becoming members of a region (Asia, Latin America, Emerging Europe or Global), organizations have access to an integrated set of services including:

Regular company coverage reports
Up-to-date investment decision advice (buy, hold, sell)
Monthly regional and global conference calls
Customized company reports and unlimited on-line access to the program's services.

Riedel provides research coverage of companies across the full range of market capitalization. Experienced research professionals in each market develop company reports and analysis as well as earnings models and projections. Ratings are Buy, Hold and Sell with a focus on compelling investment ideas - both long and short. Downloadable, dynamic earnings models are built to facilitate sensitivity analysis.

Please feel free to contact us for complimentary access to our written research.  We want to show you that our unique research flow can add value and help develop a long-term, high value-add relationship.

Riedel's model focuses on providing clients with unique insights and consulting in addition to unlimited access to all produced research This model allows members to receive exponential benefits for their retainer fees.

Thematic (Sector/Industry)

Please find below a link to a CNBC interview yesterday with David Riedel of Riedel Research on opportunities in Emerging Markets in the context of recent market volatility.Outlook for Asian markets Inflation expectations rising. Long-awaited inflation has finally arrived. Commodity prices rising.Emerging Markets Provide a Haven Emerging Markets could do better than developed in this scenario. Emerging Markets Forward P/E 11.9 vs 17x for the USOpportunities in Emerging Markets Branded consumer tech in…

Please find below a link to a CNBC interview yesterday with David Riedel of Riedel Research on opportunities in Emerging Markets in the context of recent market volatility.Outlook for Asian markets Inflation expectations rising. Long-awaited inflation has finally arrived. Commodity prices rising.Emerging Markets Provide a Haven Emerging Markets could do better than developed in this scenario. Emerging Markets Forward P/E 11.9 vs 17x for the USOpportunities in Emerging Markets Branded consumer tech in…

Riedel CNBC Interview - Opportunities in EM During Market Volatility

<ul>
<li>Emerging Markets Have an Opportunity to Shine as Growth and Valuations Relative to Developed Markets Capture Market Attention</li>
<li>Euro Area: Draghi and the ECB are reluctant to reduce QE. Will wait for multiple quarters of growth before making a change.</li>
<li>Singapore: Inflation remains very low (0.2%). Watch housing prices which saw strongest growth in 8 years in 1Q18.</li>
<li>Brazil: Inflation in April remains subdued, unchanged at up 2.8% y/y. Moody's recently raised the outlook for Brazil's sovereign credit…</li>
</ul>


Emerging Markets Have an Opportunity to Shine as Growth and Valuations Relative to Developed Markets Capture Market Attention
Euro Area: Draghi and the ECB are reluctant to reduce QE. Will wait for multiple quarters of growth before making a change.
Singapore: Inflation remains very low (0.2%). Watch housing prices which saw strongest growth in 8 years in 1Q18.
Brazil: Inflation in April remains subdued, unchanged at up 2.8% y/y. Moody's recently raised the outlook for Brazil's sovereign credit…


As Political and Economic Uncertainty Rattle Developed Markets - Emerging Markets Provide a Haven

<ul><li>Operating cash inflows grew 48% in 2017.</li><li>Real cash balance increased above 20+% every year in past 3 years.</li><li>Revenue growth accelerated to 20% in 2017 versus 6% in 2016.</li><li>Operating margin improved to 18% in 2017 versus 14% in 2016.</li><li>The Company is traded at 21x versus 32x the 5-year historical average.</li></ul>

Operating cash inflows grew 48% in 2017.Real cash balance increased above 20+% every year in past 3 years.Revenue growth accelerated to 20% in 2017 versus 6% in 2016.Operating margin improved to 18% in 2017 versus 14% in 2016.The Company is traded at 21x versus 32x the 5-year historical average.

Fat Cash Inflows Yet Traded at 2/3 of Historical P/E Average

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)

China's Live Streaming: A Fab Vulnerable to Cyberspace Content Scrutiny

Momo Inc (MOMO US) stock trades on sequential growth of MAU. Without showing steady growth of MAU, stock’s valuation will come down to 10x 2018E...

JL Warren Capital

BIDU – Break Down Q1 into Search Engine and IQiyi, Upside At Least 35%

Stock price surged after Q1 result release, closed about 10% over two weeks before when we posted our last buy suggestion. But we believe there is...

Ming Lu

Riedel CNBC Interview - Opportunities in EM During Market Volatility

Please find below a link to a CNBC interview yesterday with David Riedel of Riedel Research on opportunities in Emerging Markets in the context of...

David Riedel

As Political and Economic Uncertainty Rattle Developed Markets - Emerging Markets Provide a Haven

Emerging Markets Have an Opportunity to Shine as Growth and Valuations Relative to Developed Markets Capture Market Attention Euro Area: Draghi...

David Riedel

Fat Cash Inflows Yet Traded at 2/3 of Historical P/E Average

Operating cash inflows grew 48% in 2017. Real cash balance increased above 20+% every year in past 3 years. Revenue growth accelerated to 20% in...

Ming Lu

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