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

Virscend (1565 HK) – Neglected Selective Schools in Southwest China

Virscend (1565HK) – Revenues Accelerated & Margin Improved in 2H17

Key Risk to Private Schools: Property Developers Standing Behind

TAL Education (TAL US) - Chaos in Junior High School Application in Shanghai

Schools Come and Go, But Parents Stay Anxious – Promising Education Industry in China

Equity Bottom-Up

China Maple Leaf Educational Systems / Equity Bottom-Up

China Maple Leaf Educational Systems (1317 HK)

<ul><li>Maple Leaf’s revenue growth accelerated and its operating margin improved in past two years.</li><li>Over 4.6 million Chinese families have investable assets over RMB6 million, but there are only 430,000 students in 700 international schools.</li><li>The Company is authorized by the British Columbia Ministry of Education, Canada.  So Maple Leaf’s students can avoid those highly competitive exams such as SAT, A-level, or IB.</li><li>Maple Leaf’s P/E ratio is only half that of the other listed international school operator, <a href="https://www.smartkarma.com/entities/24126" target="_blank" data-smartkarma-citation="entities:24126:1">Bright Scholar Education (BEDU US)</a>.</li><li>Chinese school operators’ P/E average is 27% higher than Maple Leaf’s P/E.</li></ul>

Maple Leaf’s revenue growth accelerated and its operating margin improved in past two years.Over 4.6 million Chinese families have investable assets over RMB6 million, but there are only 430,000 students in 700 international schools.The Company is authorized by the British Columbia Ministry of Education, Canada.  So Maple Leaf’s students can avoid those highly competitive exams such as SAT, A-level, or IB.Maple Leaf’s P/E ratio is only half that of the other listed international school operator, Bright Scholar Education (BEDU US).Chinese school operators’ P/E average is 27% higher than Maple Leaf’s P/E.

Maple Leaf (1317 HK) – International School, Well Positioned, But Undervalued