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

Tencent Music (TME): Anti-Trust Investigation May Take at Least USD2.80 Per Share

Tencent Music (TME): Risks Lower Growth for Both Business Lines, 21% Downside

Tencent Music (TME) Earnings Preview: No Exclusive Advantage, Overvalued

Tencent Music: A Case of Failing to Live up to Hyped Expectations

Tencent Music 1Q19 Results Quick Take and the Looming US$4.85bn Lock-Up Overhang

Tencent Music (TME): Paying User Growth Tumbled in Both Business Lines, 32% Downside

Equity Bottom-Up

<ul>
<li>The operating margin dropped to 15% in 2Q19 compared to 21% in 2Q18.</li>
<li>We believe the price discount in broadcasting raised paying users and revenues, but reduced margins.</li>
<li>The monopoly of music copyrights does not bring direct revenue growth.</li>
<li>We believe TME’s fair value is 30% below the stock price.</li>
</ul>


The operating margin dropped to 15% in 2Q19 compared to 21% in 2Q18.
We believe the price discount in broadcasting raised paying users and revenues, but reduced margins.
The monopoly of music copyrights does not bring direct revenue growth.
We believe TME’s fair value is 30% below the stock price.


Tencent Music (TME): Lower Margin in 2Q2019, Overvalued as Always