Tencent Music Entertainment Group (NYSE: TME)

Sector: Communication Services Industry: Internet Content & Information CIK: 0001744676
Market Cap 24.66 Bn
P/B 2.12
P/E 15.77
P/S 5.54
ROIC (Qtr) 78.45
Div Yield % 0.00
Rev 1y % (Qtr) 20.64
Total Debt (Qtr) 542.84 Mn
Debt/Equity (Qtr) 0.05

About

Tencent Music Entertainment Group (TME), a leading Chinese music entertainment company, operates a range of music and audio platforms including QQ Music, Kugou Music, Kuwo Music, WeSing, and Lazy Audio. The company, which was founded in 2003 and is headquartered in Shenzhen, China, is listed on the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange (HKEX). TME's main business activities encompass providing online music services, social entertainment services, and long-form audio offerings. Its online music services include music streaming,...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 1.45B provides robust 2.67x coverage of total debt 542.84M, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 1.58B provide 108.37x coverage of short-term debt 14.61M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 11.11B provides 20.46x coverage of total debt 542.84M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 1.45B provides exceptional 30.99x coverage of minority interest expenses 46.77M, showing strong core operations.
  • Tangible assets of 11.11B provide exceptional 21.45x coverage of deferred revenue 517.98M, showing strong service capability backing.

Bear case

  • Operating cash flow of 1.45B barely covers its investment activities of (530.06M), with a coverage ratio of -2.73, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • High receivables of 517.13M relative to inventory of 8.01M (64.60 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating cash flow of 1.45B barely covers operating expenses of (376.40M) with a -3.85 ratio, suggesting thin operational efficiency margins and limited flexibility.
  • Long-term investments of 6.59B represent a high 34.54x of fixed assets 190.73M, indicating potential overexposure to financial assets versus operational capabilities.
  • Tax assets of 75.56M provide limited offset against tax liabilities of 228.51M, which is 0.33x, indicating potential future cash flow pressure from tax obligations.

Peer comparison

Companies in the Internet Content & Information
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GOOGL Alphabet Inc. 4,538.16 Bn 131.46 27.23 33.71 Bn
2 META Meta Platforms, Inc. 1,747.49 Bn 74.30 23.25 51.06 Bn
3 SPOT Spotify Technology S.A. 103.00 Bn 62.32 5.18 2.57 Bn
4 BIDU Baidu, Inc. 62.73 Bn 49.63 3.42 13.66 Bn
5 RDDT Reddit, Inc. 32.18 Bn 92.16 16.90 0.03 Bn
6 NBIS Nebius Group N.V. 27.81 Bn 127.53 81.80 4.51 Bn
7 TME Tencent Music Entertainment Group 24.66 Bn 15.77 5.54 0.54 Bn
8 PINS Pinterest, Inc. 16.95 Bn 8.53 4.18 0.21 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets -1.42 1.10
EV to Cash from Ops. EV/CFO -14.41 -3.08
EV to Debt EV to Debt -38.48 28.98
EV to EBIT EV/EBIT -11.44 -26.54
EV to EBITDA EV/EBITDA -20.29 9.30
EV to Free Cash Flow [EV/FCF] EV/FCF -14.41 -67.01
EV to Market Cap EV to Market Cap -0.85 0.90
EV to Revenue EV/Rev -4.69 61.25
Price to Book Value [P/B] P/B 2.12 1.56
Price to Earnings [P/E] P/E 15.77 2.92
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 0.33
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 -8.92
Dividend per Basic Share Div per Share (Qtr) 0.00 0.31
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.58
Interest Coverage Int. cover (Qtr) 1,300.40 -202.56
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 0.00 -24.06
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 0.00 175.36
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.94
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 81.46 31.53
EBITDA Growth (1y) % EBITDA Growth (1y) % 0.00 -472.14
EBIT Growth (1y) % EBIT 1y % (Qtr) 69.96 32.66
EBT Growth (1y) % EBT 1y % (Qtr) 74.00 -25.80
EPS Growth (1y) % EPS 1y % (Qtr) 88.08 -18.36
FCF Growth (1y) % FCF 1y % (Qtr) 6.12 20.83
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 22.02 19.58
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.04 0.74
Cash Payout Ratio Cash Payout Ratio 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.79 1.54
Current Ratio Curr Ratio (Qtr) 2.09 3.38
Debt to Equity Ratio Debt/Equity (Qtr) 0.05 -0.39
Interest Cover Ratio Int Coverage (Qtr) 1,300.40 -202.56
Times Interest Earned Times Interest Earned (Qtr) 1,300.40 -202.56
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % 0.00 -4,283.87
EBIT Margin % EBIT Margin % (Qtr) 291.90 -4,786.62
EBT Margin % EBT Margin % (Qtr) 40.97 -5,002.12
Gross Margin % Gross Margin % (Qtr) 43.90 58.65
Net Profit Margin % Net Margin % (Qtr) 35.10 -5,003.08