A value stock trading on 37 times earnings?

Peters MacGregor Capital Management

As a value manager, Nathan Bell from Peters MacGregor aims to buy a series of cashflows for less than they’re worth. So a technology stock trading on 37 times earnings may not scream ‘value’. However, when revenue is growing 50% year-on-year, the multiple can fall quite quickly, as he explains in this exclusive interview.

Tencent is known well for its free WeChat mobile messaging service, it has about 900 million users, half of which spend over 90 minutes on WeChat every day. Half of their revenue comes from online gaming, which is growing very quickly.

Key Points

  • Many Chinese technology stocks are growing at near 50% year-on-year.
  • TenCent, which owns WeChat, is trading at 37 times earnings, and is nearly a $350bn business.
  • Half of its revenue comes from online gaming, which is growing fast. 15% of revenue comes from advertising, which we think ‘will grow exponentially’. Mobile and online payments has huge potential as well, but has popular rivals like Alipay.

About Peters MacGregor

Nathan Bell is Head of Research at value-focused global fund manager Peters MacGregor Capital Management.

Peters MacGregor provides investors with an undervalued portfolio of world class businesses with dominant market shares and bright prospects. Click here to find out more


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