This document provides an overview of fundamental analysis and stock valuation. It discusses possible metrics for analysis such as margins, earnings growth, and valuations. It also covers identifying undervalued stocks, conducting market and company analysis, and ensuring catalysts are not already priced in. Examples of fundamental analysis of specific companies are presented, including analysis of earnings, shareholder information, analyst price targets, and different valuation approaches and ratios.

1. Fundamental
Presenter: Louis Tsang, Mark Hui 6 Jan 2021
Stock analysis and valuation

2. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
What is Fundamental Analysis?
Possible Metrics
• AddressableMarket
• Valuations (P/E, P/B, EV/EBITDA, DCF)
• Margins
• Earnings/Earnings Growth vs MarketConsensus
• Production Capacity
• Delivery Numbers
• Policy
• More
Identify (Long term/ Short term)
• Undervalued Stocks (Bottom-fishing)
• Sector Trend of Industry
• Growth and Quality Companies
• In-depth Company-specific Catalyst(M&A? Events?)
The market usually gets the same information
as you do!
Are the factors/ catalysts already priced in?
Market Analysis
CompanyAnalysis

3. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Technology S-Curve
PassengerVehicle
Revenue ↑
Operating leverage ↑
(Break-even)
Electric Vehicle
Low Market Expectation
(Constant momentum)
High Market Expectation
(Constant momentum)
Bull Market
Revenue ↓
Operating leverage ↓
Performance
Time
Aging

4. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Market Cycle
ConsolidationFermentation
Phases
Market Breakthrough
Social Media
Acquisition
Facebook has dominated
since 2009 Platforms with unique functionsInitial market players

5. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Total Sales of New Energy Passenger Vehicles In China Market
Addressable Market and Market Share
China Top 10 New Energy Passenger Vehicles Producers
as of 2020H1
China Passenger Vehicles Demand

6. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Case 1: 305 Wuling Motors
Top 10 Delivery EV Modelsin China (Source: CPCA)
HongGuang Mini has been the top selling model since Sept 2020
*HongGuang Mini is a EV Model produced by a joint venture between SAIC Motor(600104), General Motors and
Liuzhou Wuling Motors

7. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Case 1: 305 Wuling Motors

8. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Case 1: 305 Wuling Motors
- Explosive growth of
China EV Market
- Toppingsales of model
- Relativelylagging among
peers with strong
fundamental
- Price new high with
strong volume

9. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Metrics Ranking:
Revenue Growth:
PINS>SNAP>MTCH
Market Cap:
SNAP>PINS>MTCH
User Growth:
PINS>SNAP>MTCH
Average Revenue Per User:
MTCH>SNAP>PINS
Net Income Growth:
MTCH>PINS>SNAP
Case 2: MTCH Match Group

10. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Case 2: MTCHMatchGroup

11. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Case 2: MTCHMatchGroup

12. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Earnings Trading Strategy
• What is the prior earnings guidance of management?
• Does the management of the company conservatively/ aggressively/ accurately provide
earnings guidance?
• Does the company usually beat/ miss/ meet the market consensus?
• Are there any price movement patterns before and after company earnings

13. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Earnings Trading Strategy (Sample 1 MTCH)
Source: MarketBeat
Management expects
14.5% YoYGrowth in EBITDA
Source: MTCH Q3 EarningsTranscript

14. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Earnings Trading Strategy (Sample 1 MTCH)
Source: Invbots.com

15. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Earnings Trading Strategy (Sample 2 EBAY)
Source: MarketBeat
Source: EBAY Q3

16. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Earnings Trading Strategy (Sample 2 EBAY)
Source: Invbots.com

17. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Earnings Trading Strategy (Sample 2 EBAY)

18. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Shareholding Analysis (13F Filing)
- Who are the major shareholdersof the company? (Fund? Co-Founder?)
- Are the issued shares diversifiedenough to avoidvolatileprice movement due to major
shareholder transactions?
- Are the existing shareholdersincreasing or decreasing their position?
- What are the performance of the holding funds? Are they a 'beacon' to follow?

19. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Shareholding Analysis (13F Filing)(TSLA Q3)
Source: Whalewisdom

20. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Target Price of Analysts and Scenario Analysis
Source: UBS

21. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Basic Principle
• Cash is King
Cash + Good Management>> Cash
• DiscountedCash flow:
Similar to Basic Principle of Fixed Income valuation
Value of an asset is the present value of the expected cash flows on the asset
- to estimatethe life of the asset
- to estimatethe cash flows during the life of the asset
- to estimatethe discount rate to apply to these cash flows to get present value
• Valuation factors into forward looking numbers - Trailing twelve months or beyond

22. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Approaches to Valuation
• Intrinsic valuation, relates the value of an asset to the present value of expected
future cashflows on that asset. In its most common form, this takes the form of a
discountedcash flow valuation.
• Relative valuation, estimatesthe value of an asset by looking at the pricing of
'comparable' assets relative to a common variable like earnings, cashflows,book
value or sales.
• Contingent claim valuation, uses option pricing models to measure the value of
assets that share option characteristics.

23. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Key definition related to Valuation
Market capitalisation (Cap) = Basic number of shares * Share price
Diluted shares = Basic shares + additional shares assuming options exercise
PE (Dil) = Price/ Diluted EPS
PEG = PE / (3-year CAGR % * 100); CAGR = Compound Annual Growth Rate
PE (ex-cash) = (Price - Net cash per share) / Ex-cash Earnings per share
PB = Price / Book ratio
EBITDA
(Earnings before Interest,
Tax, Depreciation &
Amoritsation)
= Operating income - Depreciation - Amortisation
EV (Enterprise Value) = Market Cap – Net Cash/(Debt)
EV/EBITDA = Company valuation on an enterprise level
P/FCF = Price / Free-cash-flow ratio or FCF yield
Dividend yield = DPS / EPS
ROE = Net profit / Average Shareholders Equity

24. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Valuation Ration Comparison
Advantages Disadvantages Comment
PER Mostcommon valuation measures
Difficult to handle exceptional items of
earnings and non-cash items of earnings
Easiestvaluation measures; need to migrate
to next year PER in the middle of the year
PER
(ex-cash)
Suitable for companies with net cash > 20%
of market cap
Not suitable for net debt companies Suitable for Tech/Internet companies
PEG
(PE to growth)
Factor into long-termearnings growth
potential
Need at least 3 years forecast Preferred valuation measures
EV / EBITDA
Suitable for companies comparison like
cross-country and companies with different
capital structure; Suitable for companies
with high capital expenditure and
depreciation
Not suitable to be used as a standalone
valuation measures
Suitable for telecom, Macau gaming
companies
P/B
Suitable for asset-based companies,
e.g. banks, realestate
Not considering cash and earnings in
valuation; assets valuemay be inflated (e.g.
goodwill)
Need to apply premium and/ discountto
P/B
P/ FCF
Free cash flow is a better measureof
companies profitability than "earnings"
Free cash flow are volatile Better to a supportivemeasures
Dividendyield Actual shareholder return
Dividend may not be stable as company
earnings stability is not guaranteed
Suitable for companies with stable business
model and stable payoutratio

25. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Example: Apple multiple (traditional approach)
25.3 x
17.7 x
19.6 x
18.2 x
15.0 x 15.1 x
22.4 x
15.1 x
16.4 x
14.5 x
11.5 x
11.0 x
11.7 x
8.4 x
9.5 x
8.3 x
6.9 x
6.3 x
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
30.0 x
FY2014A FY2015A FY2016A FY2017E FY2018E FY2019E
PER PER (ex-cash) EV/EBITDA (x)

26. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Apple: Forward PE ratio (scenario analysis)
0
20
40
60
80
100
120
140
160
180
0
2
4
6
8
10
12
14
16
18
20
Close and Implied PER
Best PER Base PER Worst PER Close

27. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Apple: Forward_PER(ex-cash) (scenario analysis)
0
20
40
60
80
100
120
140
160
180
6
7
8
9
10
11
12
13
14
15
16
1/2/14
2/2/14
3/2/14
4/2/14
5/2/14
6/2/14
7/2/14
8/2/14
9/2/14
10/2/14
11/2/14
12/2/14
1/2/15
2/2/15
3/2/15
4/2/15
5/2/15
6/2/15
7/2/15
8/2/15
9/2/15
10/2/15
11/2/15
12/2/15
1/2/16
2/2/16
3/2/16
4/2/16
5/2/16
6/2/16
7/2/16
8/2/16
9/2/16
10/2/16
11/2/16
12/2/16
1/2/17
2/2/17
3/2/17
4/2/17
5/2/17
6/2/17
7/2/17
8/2/17
us$
PER(x)
Close and Implied PER ex-cash
Best PER (Ex-cash) Base PER (Ex-cash) Worst PER (Ex-cash) Close

28. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Fundamental Cal:
Repurchase price implying further upside ahead
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Average price (T+1)/ repurchaseprice (T+0)
average price (T+1) /
repurchaseprice (T+0)
Implied
4QFY17 price
Max 15% 171
Average 5% 156
Min -8% 137
average price (T+2) /
repurchaseprice (T+0)
Implied
1QFY18 price
Max 29% 191
Average 11% 164
Min -16% 124
• Repurchase price implied valuation in 1QFY18 should be US$191-124

29. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Pre/Post event price performance
Model
Release
date
Days before the release
90 60 30 15 7 5 3 1
iPhone 5
09/21/2
012 27% 22% 13% 5% 5% 1% 0% 0%
iPhone
5C / 5S
09/20/2
013 5% 17% 1% -5% 0% 1% 3% -1%
iPhone 6
/ 6Plus
09/19/2
014 19% 12% 7% -1% 0% -1% 0% -1%
iPhone
6S
09/25/2
015 -12% -9% 0% 4% -1% 1% 1% 0%
iPhone 7
09/07/2
016 16% 11% 12% -1% 1% 2% 2% 1%
Average 11% 11% 7% 0% 1% 1% 1% 0%
Based on recent price performance before iphone8 event, the implied closing price of Sep 12 = US$162.8 ($165.7 - $159.8)
Model
Release
date
Days after the release
1 3 5 7 15 30 60 90
iPhone
5
09/21/2
012 -1% -5% -5% -6% -10% -17% -25% -37%
iPhone
5C / 5S
09/20/2
013 5% 3% 3% 4% 5% 11% 19% 7%
iPhone
6 /
6Plus
09/19/2
014 0% 1% 0% 0% 0% 7% 7% 18%
iPhone
6S
09/25/2
015 -2% -4% -4% -3% -3% 6% -6% -16%
iPhone
7
09/07/2
016 -3% -3% 3% 6% 5% 8% 1% 11%
Average 0% -2% 0% 0% -1% 3% -1% -3%
Implied price performance before or after the launch of new iPhones

30. Ma c ro S t ra t e g y | F u n d a me n t a l | Te c h n ic al | |
P o rt f o l i o Ma n a g e me n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s y c h o l o g y )
Implied Valuation
Methodology Implied valuation (US$) Period
DCF $193 (base) [$286 (best) – $152 (worst)] 1-year
PER (ex-cash) $233 - $140 [based on 11x ex-cash PER] 1-year
Repurchase implied price $191 - $124 3-month
Historical pattern After iPhone event +3% (+11% to -17%) 30 days