Buy $13 NQ Mobile Inc

Equity Research

Company Rating Price Target December 21, 2017 NQ Mobile Inc. Buy $13

Ticker North America Sector Price at Dec 20, 2017 (USD) 4.00 NQ United States Technology Market Cap 422M

52-week range 3.16-4.50 Trading Below Net Cash; The Next Big Thing – Internet of Volume (ADV– 3 months) 0.54 M Vehicles, Blockchain and Smart Cars Source: S&P Capital IQ Rosenblatt Roundup • NQ currently has $725 million in cash and notes ($459 million of which in- Jun Zhang China Telecom and IT cludes the divestment of two assets). The stock’s market cap is trading 212 607-3180 close to $400 million as of yesterday’s close. [email protected]

• NQ announced a $150 million stock buyback and management buyout pro- gram at $5.25. Company Summary: • We have become increasingly interested in the story since the core busi- NQ Mobile Inc. provides mobile Internet ness has been transforming. We highlight the smart car system, aka Link services in the People’s Republic of China Motion, which involves the internet of vehicles and blockchain technology. and internationally. The company provides products and services in the areas of mobile • In our view, this could become a several hundred-million dollar revenue security, privacy, productivity, personalized business over the next few years. cloud, and family protection. It operates through two segments, Consumer and En- terprise. The One Trade Below Cash NQ announced that they have received $459 million in cash and $270 million in senior notes with an 8% interest from a Chinese private equity firm, Tongfang NQ Mobile Inc (NQ) Price Chart – 1 Yr Hightech M&A fund, to sell two business units—its mobile gaming and mobile entertainment businesses. NQ should have $778 million in cash following the divestments of the two assets, and even if we consider the $220 million con- vertible bond that NQ issued, the stock still trades below its net cash level.

The Next Big Thing: Internet of Vehicles, Blockchain and Smart Cars Link Motion has a differentiated full platform operating system – it’s not just an infotainment software add-on. This fully integrated OS and hardware platform Chart Source: Trading View will replace the myriad of ECU complexities while providing car makers with a robust and secure solution, over-the-air (OTA) updates, and a fully connected car. Combining this with the fact that the data is shared and stored in the cloud, this connected car environment can be much more than just a car or consumer vehicle but can also become a services and technology platform of the future. Linkmotion has also developed internal blockchain technology and a platform to support connected car services. The recently announced Chery Automotive partnership is expected to be just one of many new partnerships coming online since the Link Motion team has been building relationships/sales pipelines over the past several years. The China-based team comes from very seasoned executives with vast experienc- es at major global players like Qualcomm (QCOM: Neutral). We would expect more partnerships, more demo vehicles, and cars in the market as 2018 un- folds. Our research suggests Link Motion’s product could have an ASP of $300-500 per vehicle. Link Motion has potential to become a several hundred-million dollar revenue company over the next few years. Additionally, we expect the company to leverage smart car solutions and bring to market a unique services

1 PLEASE SEE LAST PAGE FOR IMPORTANT DISCLOSURES Rosenblatt Securities, 40 Wall St, New York, NY 10005

Jun Zhang December 21, 2017 China Telecom and IT Technology– NQ Mobile 212 607-3180 [email protected] model direct to consumers in a new ridesharing offering. As the company mentioned in their CC, they have been working on this business model over the past year and we are intrigued by the concept to utilize the car, through Linkmotion's carputer, to link drivers and passengers in a ridesharing service of the future.

Figure 1. Link Motion’s Motion T is a secure connected carputer that acts as a secure connected gateway, offering four different hardware configurations from a pure connected gateway to a full eCockpit solution including up to three displays and connections. Source: Link-Motion.com

Figure 2. Multiple ECUs integrated into one in Motion T connected carputer

Link Motion is actively developing and integrating ADAS/self-driving technologies into its Motion T carputer. Link Motion is also a member in Finland’s first pilot licensed robot car project UrbanAutoTest, led by VTT Technical Research Centre of Finland.

Figure 3. This robot car called “Marilyn” entered to Tampere traffic in 2017. The car is connected by Link Motion.

2 Rosenblatt Securities, 40 Wall St, New York, NY 10005

Jun Zhang December 21, 2017 China Telecom and IT Technology– NQ Mobile 212 607-3180 [email protected]

Figure 4. Link Motion’s solution is based on industry standard hardware and standard compliant open source software. The 3-2-1 Security Shield offers security and reliability to connected cars, both of which are required for the automotive industry to keep manufacturing cars that are safe.

3 Rosenblatt Securities, 40 Wall St, New York, NY 10005

December 21, 2017 Technology– NQ Mobile

Industry Analysts

Marshall Senk Jun Zhang Hans Mosesmann Director of Research China Telecom and IT Semiconductors 212 607-3153 212 607-3180 212 607-3181 [email protected] [email protected] [email protected] Alan Gould Chris Allen Media Global Exchanges & Capital Markets 212 607-3114 212 607-3144 [email protected] [email protected] Important Disclosures I, Jun Zhang, attest that the views expressed in this research report accurately reflect my personal views about the subject matter, security, or issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The material prepared by me employs appropriate expertise, and I believe that it fairly and accurately represents the subject matter reported upon and is not misleading. I accept no liability for any loss resulting from the use of the material presented in this report, except that this disclaimer of liability does not apply to the extent that such disclaimer may be prohibited by specific statutes, laws or regulations. This report is not to be relied upon in substitution for the exercise of independent judgment. I may have issued and may in the future issue, other reports that are inconsistent with, and which reach different conclusions than the information presented in this report. Those reports reflect the different assumptions, views, and analytical methods of the analysts who prepared them at that time and I assume no obligation to ensure that any other reports on the same subject matter addressed herein are brought to the attention of any recipient of this report. Ownership & Material Conflicts of Interest: None. Compensation: The research analyst who authored this report (the "Analyst") does not receive compensation based on the Firm's investment banking revenues or from the Company and has not done so for the past twelve months. The Firm does not have any investment banking relationship with the Company. As such, the firm has not received compensation for investment banking activities in the past twelve months and does not expect to receive compensation for investment banking activities in the next 3 months. The Firm does not have a consulting or other revenue-generating relationship with the Company in the last twelve months. Position as Officer/Director: The Analyst does not serve as an officer, director, or advisory board member of the Company. The same is true for members of the Ana- lyst's household. Explanation of Equity Research Ratings: Rosenblatt Securities, Inc. uses the following ratings system: Buy [We believe this stock will outperform relative to other companies in its industry over the following 12 months.] Sell [We believe this stock will underperform relative to other companies in its industry over the following 12 months.] Neutral [We believe that this stock’s performance will be in line with the average return of others in its industry over the following 12 months.]

Price Chart:

Price Targets: Please refer to the model for important information regarding valuation and the Analyst’s method for determining Price Targets, as well as risk factors that may impede achievement of said target. Date Rating Share Price Price Target Date Rating Share Price Price Target Date Rating Share Price Price Target 29-M ay-15 Buy $4.14 $8.10 1-Dec-15 Buy $4.21 $13.00 17-M ay-16 Buy $4.52 $13.00 3-Jun-15 Buy $4.54 $8.10 22-Feb-16 Buy $3.78 $13.00 27-M ay-16 Buy $4.00 $13.00 1-Jul-15 Buy $5.28 $10.00 23-M ar-16 Buy $4.31 $13.00 25-Jul-16 Buy $3.66 $13.00 27-Aug-15 Buy $3.03 $13.00 31-M ar-16 Buy $4.59 $13.00 23-Aug-16 Buy $4.51 $13.00 19-Nov-15 Buy $3.72 $13.00 6-M ay-16 Buy $4.98 $13.00 21-Dec-17 Buy $4.00 $13.00 Source: S&P Capital IQ

Rosenblatt Securities Equity Research Ratings Distribution, as of December 21, 2017

Buy Neutral (Hold) Se ll Rosenblatt Securities Equity Research Coverage 66.1% 29.0% 4.8% IB clients* 1.6% 0% 0%

*Percentage of investment banking clients in each rating category.

For purposes only of FINRA ratings distribution rules, our Neutral rating falls into a hold rating category. Please note that stocks with an NR (Not Rated) designation are not included in the table above.

4 PLEASE SEE LAST PAGE FOR IMPORTANT DISCLOSURES Rosenblatt Securities, 40 Wall St, New York, NY 10005

December 21, 2017 Technology– NQ Mobile

Industry Analysts

Other Disclosures: All the views expressed in the research report accurately reflect the research analyst's personal views about any and all of the subject securities or issuers and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations, valuations, or views expressed by the research analyst in the research report. The information contained in this report is not a complete analysis of every material fact with respect to any company. industry or security and is not an offer or solicita- tion to buy or sell any security. Although opinions and estimates expressed in this report reflect the current judgment of the Firm, the information upon which such opinions and estimates are based is not necessarily updated on a regular basis. Estimates are not reviewed on a regular basis. In addition, opinions and estimates are subject to change without notice. Each investor must make its own determination of the appropriateness of an investment in any securities referred to herein based on any legal, tax and accounting considerations applicable to such investor and its own investment strategy. By virtue of this publication, Rosenblatt Securities Inc or their employees shall not be responsible for any investment decision. The Firm from time to time may perform corporate finance services for companies mentioned in this report and may occasionally possess material, nonpublic information regarding such companies. This information is not used in the preparation of the opinions and estimates contained in this report. Facts and the other information contained in this report have been obtained from public sources considered reliable but are not guaranteed in any way.

5 PLEASE SEE LAST PAGE FOR IMPORTANT DISCLOSURES Rosenblatt Securities, 40 Wall St, New York, NY 10005