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Tencent is difficult to value because it does not differentitate itself segment by segment and show which companies are counted under each Segment. This is unlike Alibaba's quarterly presentation which shows what each segment accounts for and what companies are in the segment. However, my view and how i give a fair value is a sum of parts and estimate its segment worth. For its online social media/ advert arm, it should be worth a HKD$1.15 trillion based on its segment earnings of 30 times P/E
Secondly, tencent as a conglomerate have a large group of holdings and the valuation of USD 113 billion might be understated because I feel Tencent music and Huya are undervalued by the market and I would add a few more billion, preference is to place it at USD120 billion (HKD $937 billion).
The above two contributes HKD$2 trillion to the congolemerate.
Its gaming and Fintech/Business is likely to generate about RMB$150 (HKD$165 billion). This means for HKD$700 billion, I am paying for a segment at about 4 times P/E. That is cheap. I view these segments to be about HKD$3 trillion. And therefore the upside of Tencent as a whole could be about 70-80% more, of course if we based the price earnings to International peers, 20-30 times P/E is on the low end. My view is that Tencent Holdings is a HKD$5 trillion conglomerate
For how I estimated 15 times P/E, 10 times free cash flow. Its based on financial results. It generates adjusted EBITDA of RMB$225 billion, minus off taxes of RMB$25 billion, free cash is about RMB$200 billion (HKD $220 billion). Current free cash is about 12 times. Tencent profit to its shareholders is RMB$194 billion (HKD $213.2 billion) based on its last 4 quarter results. Based on its current share prices, its P/E is about 13 times now
Alibaba I did a sum of parts and i got about USD$424 billion
Secondly, tencent as a conglomerate have a large group of holdings and the valuation of USD 113 billion might be understated because I feel Tencent music and Huya are undervalued by the market and I would add a few more billion, preference is to place it at USD120 billion (HKD $937 billion).
The above two contributes HKD$2 trillion to the congolemerate.
Its gaming and Fintech/Business is likely to generate about RMB$150 (HKD$165 billion). This means for HKD$700 billion, I am paying for a segment at about 4 times P/E. That is cheap. I view these segments to be about HKD$3 trillion. And therefore the upside of Tencent as a whole could be about 70-80% more, of course if we based the price earnings to International peers, 20-30 times P/E is on the low end. My view is that Tencent Holdings is a HKD$5 trillion conglomerate
For how I estimated 15 times P/E, 10 times free cash flow. Its based on financial results. It generates adjusted EBITDA of RMB$225 billion, minus off taxes of RMB$25 billion, free cash is about RMB$200 billion (HKD $220 billion). Current free cash is about 12 times. Tencent profit to its shareholders is RMB$194 billion (HKD $213.2 billion) based on its last 4 quarter results. Based on its current share prices, its P/E is about 13 times now
Alibaba I did a sum of parts and i got about USD$424 billion