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

Key Risk to Private Schools: Property Developers Standing Behind

Tianli Education (1773 HK) Grows Dramatically Without Typical Shortages, Upside 22%~43%

Tianli Education IPO: A Quality Pure K-12 Player, High Growth but Fairly Valued at High End

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

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

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

Equity Bottom-Up

<ul><li>We posted an introduction on Virscend on March 23, one week before the annual results, which pointed out  the Company was neglected and undervalued.</li><li>The revenue growth rose to 22% yoy in 2H17 versus 9% yoy in 1H17 and 13% yoy in 2H16.</li><li>The operating margin improved to 34% in 2H17 versus 31% in 2H16 despite of the opening of new schools.</li><li>The 8 new schools opened in 2H17 will gradually reach full utilization in the following 5 years.</li><li>There are 6 schools in the pipeline.</li><li>Compared to peer companies’ P/E, there should be an upside of 23%.  BUY.</li></ul>

We posted an introduction on Virscend on March 23, one week before the annual results, which pointed out  the Company was neglected and undervalued.The revenue growth rose to 22% yoy in 2H17 versus 9% yoy in 1H17 and 13% yoy in 2H16.The operating margin improved to 34% in 2H17 versus 31% in 2H16 despite of the opening of new schools.The 8 new schools opened in 2H17 will gradually reach full utilization in the following 5 years.There are 6 schools in the pipeline.Compared to peer companies’ P/E, there should be an upside of 23%.  BUY.

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

Virscend Education

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