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 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

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

Tencent Music (TME): Only 29% Spotify-Like, But the Other Business Produces Profits

Tencent Music (TME): Both Live Video and Music Fairly Valued, No Action

Tencent (700 HK): Tencent Music – Pre-IPO Monopolist

Tencent Music Pre-IPO Review - The Final Countdown - Growth Doesn't Seem to Be Slowing Down

Equity Bottom-Up

<ul>
<li>Stripping music subscription revenues, we find TME’s revenues from corporate clients are not stable.</li>
<li>We believe in-house products will negatively impact margin in 2019.</li>
<li>We believe the main business line, social entertainment, will grow strongly. However, we also believe the market is over optimistic about the margin.</li>
<li>We believe the stock price has downside of 35%.</li>
</ul>


Stripping music subscription revenues, we find TME’s revenues from corporate clients are not stable.
We believe in-house products will negatively impact margin in 2019.
We believe the main business line, social entertainment, will grow strongly. However, we also believe the market is over optimistic about the margin.
We believe the stock price has downside of 35%.


Tencent Music (TME): Problems Come from Corporate Clients and In-House Contents, 35% Downside