Trinity Investments Limited – TME Company and IPO in Numbers

HONG KONG - Nov. 4, 2018 - PRLog -- In 2017, the company reported $1.659 billion in revenues, exhibiting revenue growth of 151% y/y.

Growing revenues at 151% y/y and operating in an industry that is expected to grow at 36.7% y/y, Tencent Music Entertainment is organizing one of the most interesting IPOs of the year. In addition, the company has a very solid financial shape with an asset/liability ratio of over 7.79x and assets of $4.534 billion.

The Largest Online Music Entertainment Platform In China

Founded in 2016, incorporated in Cayman Islands and headquartered in Shenzhen, China, Tencent Music is said to be the largest online music entertainment platform in China. With an app that was one of the top four music mobile apps in Q2 2018, the company offers online music but also music-centric live streaming products with an innovative technology and data to assess users' preferences and enhance users' experience.

Counting over 800 million total unique monthly active users in Q2 2018, Tencent Music does not only provide music but it also permits socializing and singing. The secret sauce seems to be the way the company enhances social interactions between users. Those skeptical about this name should know that the users on average spend about 70 minutes per day on the platform.

Investors need to take into account that the company was created only two years ago. Tencent Music should be delivering something extremely revolutionary. Technological companies usually don't grow that fast.

Another critical feature that helps explain the success of Tencent Music is the content offered by the company. The prospectus reads that Tencent Music owns 20 million tracks from 200 different music labels. In addition, it seems remarkable that hundreds of millions of users share their videos on the company's platform. The best thing does not seem to be written in the prospectus. Users upload content for free or for a minimal amount of money, the way YouTube, LLC, owned by Alphabet/Google, does. It will be shown later in the income statement that Tencent Music has been able to monetize its platform. The company makes money through paid subscriptions, premium memberships, sale of music and virtual gifts, among other monetization strategies.

Large Amount Of Assets And Small Amount Of Liabilities

With an asset/liability ratio of over 7.79x, the financial situation of Tencent Music seems very stable. As of December 31, 2017, the company reported assets of $4.534 billion and total liabilities of $0.582 billion.

In addition, investors will appreciate that the amount of liquidity is large. As of December 31, 2017, the company reported cash representing 17% of the total amount of assets. Also, goodwill comprises 54% of the total amount of assets, which could be seen as a risk and should be monitored. Keep in mind that accountants could reduce the value of this item.

The liability side of the balance sheet does not seem worrying. The most beneficial seems to be the fact that the company has no long-term debt. The company was able to receive financing only from the sale of equity.

Revenue Growth Of 151% y/y

The income statement looks even better than the balance sheet. In 2017, the company reported $1.659 billion in revenues, exhibiting revenue growth of 151% y/y. In addition, the gross profit margin is also quite decent. Tencent Music reported gross profit of $576 million and net income of $199 million or $0.08 per share. The profit does not look that significant, but it should interest value investors. As for growth investors, they will not really care about the net income, but they will be more concerned about the impressive revenue growth. If Tencent Music is able to maintain the same level of revenue growth, they should push the share price up. With this in mind, revenue growth is what the market should care about on this name.

Finally, it seems quite beneficial that Tencent Music does not have large amount of selling and marketing expenses. The company is generating more than $1 billion from sales and reporting only $138 million in sales expenditure. In a few words, its platform is so unique that the company does not need to advertise a lot. Keeping in mind this idea, if Tencent Music advertises a bit more, investors should expect revenue to increase even more.

The cash flow statement shows positive CFO and growing at a high pace. In 2017, the CFO increased by 186%, which value investors will appreciate much. If the CFO continues to increase, the market should push the stock price up, thus it is another item to study closely in the next quarterly reports.

Use of Proceeds

The company expects to use the proceeds from the IPO to finance additional music content, for the development and enhancement of products as well as marketing and perhaps the acquisition of other businesses.

It is beneficial that the company will not use money to repay debts, or to pay previous shareholders.

Large Global Opportunity And Conclusion

Trinity Investments Limited notes that the size of China's online music pan-entertainment market was approximately $4.74 billion in 2017. In addition, it is expected that it should be equal to approximately $30.89 billion in 2023. If these figures are correct, the market should grow at a CAGR of 36.7% from 2017 to 2023.

To find out more about the Tencent Music IPO or other opportunities Trinity investments see's in the markets, visit www.trinity-investments.com  or email us at info@trinity-investments.com and we will happily get back to you.