TME
Tencent Music Entertainment Group
$8.88
Platform & Compounding FCF
85%
Two-stage FCF DCF
Strong
·
Conviction
Undervalued
Trading 59.0% below fair value
You pay
$8.88
Bear
$16.25
Fair
$21.67
Bull
$27.09
Bear
$16.25
+83.0%
6% stage 1 growth, 11% discount
Fair
$21.67
+144.0%
11% stage 1 growth, 11% discount
Bull
$27.09
+205.0%
14% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (11% base case)
Terminal Value % of EV
39%
Implied Market Multiple
7.3x
Market is pricing in (growth)
-5.1%
vs 10.7% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $16.02 from 24 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $21.67 per share.
Warnings
Wall Street's average price target is $16.02 (from 24 analysts). Our estimate is 47% above the consensus -- consider that gap carefully.
Financial statements were converted from CNY into USD using USDCNY at 0.1478 USD per CNY.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions