No. of Recommendations: 12
TME is a newly listed hyper-growth music streaming/online entertainment business which has recently been spun off from China's internet giant - Tencent.

TME (via its 4 apps and its ecosystem) controls 76% of China's music streaming market; with Netease's streaming service coming in at 2nd spot (just 16% market share).

Unlike Spotify (SPOT), TME is already profitable and its earnings are projected to increase by 32% CAGR over the next 5 years. Its year-end P/E ratio is around 34, so the PEG ratio is just 1 - which is a bargain for such a dominant/high quality business.

TME has already amassed 800 MILLION monthly active users in China and at present, only 3.6% of these pay a subscription fees, so there is a massive runway for growth. Approximately, 70% of the company's revenue is generated from users buying virtual gifts for their favourite artists (TME keeps a cut from these gifts/tips) and this business segment is growing like a weed!

It is notable that in December 2017, Tencent and Spotify did a "stock swap", so now the latter owns 9.1% of TME whilst its parent company (Tencent) still owns 58%.

Before the IPO, both Sony and Warner were given $200 million worth of stock in TME at $2.93/share and since the stock is currently trading around $15, they have already made a tidy profit.

TME's music library is massive - it is home to 20 million songs and the company has signed licensing/partnership deals with approximately 200 music labels.

Since TME controls 76% of the online music streaming/entertainment market in China, this industry is still in its infancy and Tencent is the parent company, this business seems to have a very bright future.

In terms of the stock itself, after a month-long post IPO consolidation, TME has broken out of its base today (on heavy volume), which is a sign that institutions are keen on this issue.

Given the above factors, I've just invested 5% of my portfolio in this business (and in order to raise cash for this opportunity, I've booked my gains in New Oriental Education - EDU).

At present, approximately 35% of my portfolio is invested in high-growth businesses in China (I've been increasing my China holdings since October 2018) and the rest of my capital is invested in other high-growth companies in the US and Latin America.

Hope this has been helpful,

GM
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