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

Thoughts on Amazon –What Does Its Valuation Tells Us?

Netflix & Amazon Expand in Korea – Not a Coincidence

Okja: The Fight Between Netflix Vs. CJ CGV

Equity Bottom-Up

<ul><li>Tencent announced that the operating margin improved 1 percentage point in 2018 versus 2017, but we believe the operating margin declined for two years.</li><li>Operating profits should not count the gains from IPO exits.</li><li>In 2017, the gross margins of both main businesses (VAS and the online advertising) declined due to the competition of content acquisition.</li><li>The P/E band suggests 17% downside for the year end of 2018.</li></ul>

Tencent announced that the operating margin improved 1 percentage point in 2018 versus 2017, but we believe the operating margin declined for two years.Operating profits should not count the gains from IPO exits.In 2017, the gross margins of both main businesses (VAS and the online advertising) declined due to the competition of content acquisition.The P/E band suggests 17% downside for the year end of 2018.

Tencent (700 HK) – Real Operating Margin Actually Fell