Was going through Pershing’s (PSH) 2023 annual ppt, wherein they discussed Universal Music group’s thesis and opportunity at hand
Disc: Invested from 2021 levels (position size here). No transactions in last-30 days.
Tips Industries spiked today in a follow up move to Saregama. Sudden buying around 3 pm.
Any news? Or just some UHNI/DII got a fancy for music stocks?
Stance: Invested, Looking to add more in case of dips
Don’t think there is any news on this behind the recent rally.
I guess this is what the bull market does. However, the business continues to show strong fundamentals.
In fact, PE ratio of global music labels are also >40 presently.
Warner Music - ~40 PE
Universal music - ~42 PE
Generally, there is a premium for Indian companies; Hence, the valuation of 50 PE for Tips can be justified, because they show strong promise of 30% growth.
However, nothing can be said about valuations in bull markets. Given the business model is superb, I may add this whenever there is a drop in price.
Did a quick survey of TIPS’ numbers and valuation w.r.t. global/domestic peers
While I have not done an in-depth study of its global peers, I am keen to do it now considering its growth has been feverish thus far and at the same time valuation has been stretching beyond its 3/5y median PE.
However, looking at the global/domestic peer set, valuation vis-a-vis growth over time is the best in class.
@ankush12495 Sorry to bother and I don’t know if you still hold but would love to hear your thoughts on the same. thanks in advance.
Disc: Invested from 2021 levels (position size here). No transactions in the last 30 days.
Globally I think the markets are realizing the longevity of growth & terminal value that exists in these business on the back of their IP.
Monetization of music IP will only expand over the years, short format monetization has just started in the global markets and changes within streaming players wherein only streams over a certain count will be counted for monetization are some of the recent steps that further improves the monetization for these players.
In India music labels are even better placed as they have both master recording & publishing rights, plus some players like Tips have entire IP with no royalty and thus margins are higher. The growth is obviously top notch for Tips as it has gone from inefficient player to a decent player.
(Disclosure: SEBI Registered RA. Invested and Active recommendation in Research Service)
@ankush12495 Thanks for the update.
What is your view on the sustenance of growth (30% topline and bottom line) beyond 3 years?
What I feel, following are the growth levers
- New listeners: Music library getting older day by day is my concern. However, paid listeners should keep on increasing for downstream platforms as a secular trend for longer.
- New monetization channels: Short video content, Instagram - probably these are the only few monetization ways with some juice left.
Would like to hear other’s thoughts?
I feel the growth would be high, whether it would be 30% or 5-10% here or there I don’t know.
The biggest low hanging fruit currently is proper monetization of shorts, Tips has already pulled its content from Instagram and I think the new deal would happen at a substantial amount whenever that happens.
And in the longer run, people will have to pay for convenience of streaming music like they are paying for now for say food delivery etc and that would trickle down to music labels.
I have shared some thoughts on monetization of convenience here if you are interested-
extension of tie-up with Warner Bros, as per this report Warner will promote Tips under its folds. which seems very promising.
The CEO mentions that this means Tips catlog will be distributed via Meta as well. If that interpretation is true then the company should do even better growth over the next 4 quarters.
I would like to think that the newly hired CEO had a role in this deal. Maybe we will get more information next quarter