Tencent Subsidiary China Literature Prepares for Hong Kong IPO with Estimated Value of USD7 Billion

Tencent Subsidiary China Literature Prepares for Hong Kong IPO with Estimated Value of USD7 Billion

Liao Shumin

Date: Thu, 10/19/2017 - 14:04 / source:Yicai
Tencent Subsidiary China Literature Prepares for Hong Kong IPO with Estimated Value of USD7 Billion
Tencent Subsidiary China Literature Prepares for Hong Kong IPO with Estimated Value of USD7 Billion

(Yicai Global) Oct. 19 -- China Literature, the country’s largest online literature platform and an affiliate of internet giant Tencent Holdings Ltd. [HKG:0700], could see its value reach an estimated USD6.8 billion after its initial public offering in Hong Kong this month, the Wall Street Journal reported yesterday.

The company aims to monetize 9.6 million works on its platform by charging readers a small fee, and readers will also be able to read the first several chapters of most serial works on the platform for free.

China Literature has rolled out several websites and apps and boasts almost 200 million monthly active users, of which 6 percent are paid subscribers.

The firm derives most of its revenue from online reading, copyrights, paper books, online game services and online advertising. Income from online reading rose to CNY1.724 billion (USD260 million) last year, up from CNY788 million in 2015. The company reported revenue of CNY2.57 billion in 2016, an annual rise of 59.1 percent., while net profit hit CNY304 million, reversing a loss of CNY354 million the year before.

Morgan Stanley & Co. [NYSE:MS], one of the IPO’s sponsors, estimates the value of China Literature to be between USD5.7 billion and USD6.8 billion, based on a forecast profit calculation at a price-earnings ratio of between 23 to 28 times in 2019.

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Keywords: Hong Kong, IPO, China Literature, TENCENT