Thread by @frankinvesting

1/

$TCEHY back-of-envelope valuation

10yr FCF per share CAGR of 31%
10yr EPS CAGR of 34%
10yr median FCF margin of 34%
ROIIC 59.4%
Reinvestment rate 41.7%

Investment portfolio value of ~$200B (conservatively).

LTM earnings $28.7B
Current Market Cap $564.4B

2/

That’s a P/E of 19.6

If we back out the investment portfolio value we get to just 12.6x earnings for the core business.

ROIIC * Reinvestment rate gets us to 25% growth. Let’s slow that down to 15% to be conservative.

3/

If we apply 15% growth to $81.2B LTM revenues we get to $163.2B in 5Y.

Median 10yr FCF margin is 34%, let’s use just 25% to be conservative again.

That gives us a FY26 FCF of $40.8B

4/

Current P/FCF multiple is as compressed as it’s been at 23.

A fair multiple for FY26 is probably > 30x FCF. But let’s use 25.

That’s gives us a conservative market cap in FY26 of $1T without considering the growth of the $200B+ investment portfolio.

5/

The IRR on those overly conservative estimates is 12.1%

Honestly, I think that’s the bear case of $TCEHY at the current price.

Likely, higher multiples, margins, growth & investment portfolio returns will be a reality. Leading to an IRR >20%

Disclosure: long $TCEHY