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

Tencent is not an overheated company riding on the home quarantine. On the contrary, we believe  the competitors to all Tencent's business lines are in trouble. These provide Tencent another opportunity of upside.
The 6-year P/E Band suggests an upside of 24% for the end of 2021 and a price target. We upgraded Tencent to "buy" after the release of the 3Q20 result. Now we raise our price target from HK$660 to HK$700.

Tencent is not an overheated company riding on the home quarantine. On the contrary, we believe  the competitors to all Tencent's business lines are in trouble. These provide Tencent another opportunity of upside.
The 6-year P/E Band suggests an upside of 24% for the end of 2021 and a price target. We upgraded Tencent to "buy" after the release of the 3Q20 result. Now we raise our price target from HK$660 to HK$700.

2021 High Conviction: Long Tencent as All Competitors Are in Trouble

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.

Forensic Accounting

Muddy Waters’ short selling report on YY is technically detailed and logical.  It showcases its team’s cyber capability to collect user activity data and analyze them.  While the report is credible, we believe that the data used to make its arguments are snapshots of activities during specific periods (i.e. during the annual talent show from November 2019 to January 2020). The lack of a continuum has created biases, and ultimately results in an inappropriate conclusion that YY is 90% fraudulent.  Our due diligence primarily involves speaking with the agencies that have helped to build the YY video streaming business, leads us to conclude that YY Live is “mostly” real.  It is a massively lucrative cash machine monetizing on fandom-ship and virtual relationships among individuals across China. While the virtual gifting phenomenon is difficult for certain American investors to comprehend, it is prevalent in China.

Muddy Waters’ short selling report on YY is technically detailed and logical.  It showcases its team’s cyber capability to collect user activity data and analyze them.  While the report is credible, we believe that the data used to make its arguments are snapshots of activities during specific periods (i.e. during the annual talent show from November 2019 to January 2020). The lack of a continuum has created biases, and ultimately results in an inappropriate conclusion that YY is 90% fraudulent.  Our due diligence primarily involves speaking with the agencies that have helped to build the YY video streaming business, leads us to conclude that YY Live is “mostly” real.  It is a massively lucrative cash machine monetizing on fandom-ship and virtual relationships among individuals across China. While the virtual gifting phenomenon is difficult for certain American investors to comprehend, it is prevalent in China. 

YY Due Diligence Suggesting a Lucrative Cash Machine with Unique Ecosystem

Alibaba Health Information Tec / Equity Bottom-Up

<ul>
<li>The National Radio and Television Administration forbids juveniles from paying broadcasters.</li>
<li>It was widely rumored that both Alibaba (BABA) and Tencent (700 HK) stopped negotiating the acquisition of iQiyi (IQ).</li>
<li>The National Medical Products Administration formally allow prescription drug to be sold online.</li>
</ul>


The National Radio and Television Administration forbids juveniles from paying broadcasters.
It was widely rumored that both Alibaba (BABA) and Tencent (700 HK) stopped negotiating the acquisition of iQiyi (IQ).
The National Medical Products Administration formally allow prescription drug to be sold online.


China Internet Weekly (30Nov2020): Approve Online Rx Drug, Ban Juveniles from Paying Broadcasters

<ul class="">
<li>Huya (HUYA)’s security guard carried an employee out of the office by force.</li>
<li>Shenzhen Municipal Anti-Pornography Office suspended Tencent Music (TME)’s karaoke platform for 30 days.</li>
<li>Alibaba (BABA) is facing class action for the investment in Ant Group.</li>
<li>Baidu (BAIDU) acquired Joyy (YY)’s business in China, which is a short target.</li>
</ul>


Huya (HUYA)’s security guard carried an employee out of the office by force.
Shenzhen Municipal Anti-Pornography Office suspended Tencent Music (TME)’s karaoke platform for 30 days.
Alibaba (BABA) is facing class action for the investment in Ant Group.
Baidu (BAIDU) acquired Joyy (YY)’s business in China, which is a short target.


China Internet Weekly (23Nov2020): HUYA’s Violence, TME’s Porn, and BIDU Acquired a Short Target

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Haier Electronics Group Co / Event-Driven

Last Week in Event SPACE: Haier, NTT Doco, Tesla, Beijing Jingneng, China Biologics, HK IPO Lock-Ups

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)

2021 High Conviction: Long Tencent as All Competitors Are in Trouble

Tencent is not an overheated company riding on the home quarantine. All the competitors to all Tencent's business lines are in trouble. These...

Ming Lu

YY Due Diligence Suggesting a Lucrative Cash Machine with Unique Ecosystem

YY's live streaming is a massively lucrative cash machine monetizing on fandom-ship and virtual relationships among individuals across China.

JL Warren Capital

China Internet Weekly (30Nov2020): Approve Online Rx Drug, Ban Juveniles from Paying Broadcasters

The authorities forbid juveniles from paying broadcasters. The Medical Administration allows prescription drug to be sold online.

Ming Lu

China Internet Weekly (23Nov2020): HUYA’s Violence, TME’s Porn, and BIDU Acquired a Short Target

Huya security guard carried an employee out of office by force. Shenzhen Authorities suspended Tencent Music ’s karaoke for 30 days. Baidu acquired...

Ming Lu

Last Week in Event SPACE: Haier, NTT Doco, Tesla, Beijing Jingneng, China Biologics, HK IPO Lock-Ups

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

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