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

A Visit to Alibaba’s “New Retail” – Physical Store Hema

A Visit to Super Species - Investee of Tencent and Alibaba's Main Competitor In "New Retail"

A Site Visit: Alibaba (BABA) Successfully Integrates “New Retail” into RT-Mart of Sun Art (6808 HK)

Update on Pilot Program on CDRs - Administrative Measures Draft Announced

Alibaba (BABA) – An Accounting Purpose in Venture Capital Investment

Alibaba (BABA) – Kicking Competitors Out of Cloud Computing with a Stable Negative Margin

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<ul class=""><li>Alibaba’s operating margin of core-commerce tumbled in fiscal 2018 (end-Mar 2018).</li><li>We believe Alibaba sacrificed operating margin to compete in consumer acquisition.</li><li>We conclude Alibaba faces severe competition.</li><li>We expect a downside of 16% based on a stable margin in 2019, as the losses in minor businesses may shrink.</li></ul>

Alibaba’s operating margin of core-commerce tumbled in fiscal 2018 (end-Mar 2018).We believe Alibaba sacrificed operating margin to compete in consumer acquisition.We conclude Alibaba faces severe competition.We expect a downside of 16% based on a stable margin in 2019, as the losses in minor businesses may shrink.

BABA Sacrificed Margin to Acquire Customers in FY2018