Tencent Music Entertainment at – GuruFocus.com

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Chinese providers of services such as online music streaming, video games and news appear to be performing well. China’s Ministry of Industry and Information Technology said these companies saw their profits increase at an annual rate of 18.3 percent in the first seven months of the year to reach around $ 76.5 billion. of dollars.

Tencent Musical Entertainment Group (TME, Financial) is one of the companies well positioned to take advantage of the strong tailwind of this sector of the Chinese e-commerce market, which is seeing more and more people, especially the younger generation, following their favorite artists on the internet. Tencent’s total revenue accounts for a significant share of the total domestic music, video game, and online news market.

Based in Shenzhen, Tencent Music is a leader in the online music and audio entertainment industry in mainland China, with its popular apps for enjoying, sharing music, and interacting with other streaming services such as QQ Music. , Kugou Music, Kuwo Music and WeSing.

On its platform, which is equipped with music, audio, karaoke and live streaming services, users can listen to music, watch music videos, sing along and socialize with other music fans.

In the second quarter, helped by strong online music monetization momentum and higher monthly average revenue per paying user of social entertainment services, total revenue grew 264% year-on-year to $ 1.24 billion. dollars.

Total sales exceeded expectations by $ 10 million, but Tencent posted adjusted earnings of 10 cents per share, beating analysts’ estimates by 9 cents.

The balance sheet looks strong, with $ 22.3 billion in cash and short-term investments far exceeding the total debt of $ 5.4 billion. The interest coverage ratio of 33 indicates that the company has no problem paying interest charges on outstanding debt. Financially, the company is well supported to pursue its growth strategy. Tencent Music Entertainment Group is striving to develop audio, music and video services as well as multimedia technologies that will allow more music fans to use its entertainment services and spend more time on the platform. .

For the year 2021, analysts expect the company to post earnings of $ 2.28 per share (up 395.7% year-over-year) on total revenue projected $ 32.07 billion (up 606.3% year-over-year).

The stock doesn’t look expensive as the stock price of $ 9.46, at the start of Tuesday’s trading day, is below the 50-day moving average of $ 9.74 and the 200-day moving average. of $ 16.53.

The stock has a market cap of $ 15.11 billion for a 52-week range of $ 7.03 to $ 32.24, a price-earnings ratio of 28.62 compared to the industry median of 26.46 and a price-to-sales ratio of 3.12 versus the industry median of 4.39.

Tencent Music Entertainment Group does not pay dividends.

Wall Street issued a median overweight recommendation rating with an average target price of $ 12.81.

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