Tag Archives: Tencent
HONG KONG (Reuters) – Tencent Holdings (0700.HK) said on Wednesday its third-quarter net profit rose 30 percent, beating estimates, as investment gains offset a weak performance in the Chinese company’s core gaming business.
FILE PHOTO: Tencent Holdings Chairman and CEO Pony Ma (C) visits the Tencent booth following the opening ceremony of the fifth World Internet Conference (WIC) in Wuzhen, Zhejiang province, China November 7, 2018. REUTERS/Stringer/File Photo
Net profit at China’s biggest gaming and social media group in the July-September quarter rose to 23.3 billion yuan, compared with an average estimate of 19.32 billion yuan, according to 15 analysts polled by to I/B/E/S data from Refinitiv.
Revenue rose 24 percent to 80.6 billion yuan ($ 11.59 billion), the slowest quarterly growth in more than three years, in-line with estimates.
China, the world’s biggest gaming market, has been imposing tougher rules on the industry, including a halt to new game approvals since March and calls to tackle young people’s gaming addictions.
This contributed to Tencent reporting its first quarterly profit fall in more than a decade in its April-June quarter. The company also cut its gaming marketing budget.
Tencent shares, which more than doubled in 2017, have dropped by about a third so far this year, wiping about $ 165 billion in value from the group’s market value.
In the third quarter, Tencent benefited mainly from a more-than-doubling in net gains from its investment activities, including the initial public offering of online food delivery to ticketing services company Meituan Dianping.
Douglas Morton, Head of Research, Asia at Northern Trust Capital Markets, said the result beat was a positive surprise even if not counting the investment income.
“What the real surprise is or the real comfort for the market will be that the mobile gaming data which beat expectations,” he said.
Tencent said smartphone games revenues grew 7 percent year-on-year and 11 percent quarter-on-quarter to 19.5 billion yuan, mainly due to contributions from new games. Despite the new approval freeze, Tencent already had 15 approvals and released 10 titles in the quarter, it said in the filing.
PC games revenue dropped 15 percent year-on-year due to continued user migration to mobile games and high base in the same quarter a year ago.
Advertising revenue, which accounts for 20 percent of the company’s total revenue, rose 47 percent, supported by a 61 percent jump in social and other advertising.
Tencent said its cloud services revenues more than doubled year-on-year in the quarter while the number of paying cloud customers grew at a triple-digit percentage rate year-on-year. Cloud revenues for the first three quarters of the year exceeded 6 billion yuan, it said.
Monthly active user number of WeChat, the most popular social network in China, rose incrementally to 1.08 billion.
($ 1 = 6.9536 Chinese yuan)
Reporting by Sijia Jiang; Editing by Muralikumar Anantharaman and Jane Merriman
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SHANGHAI (Reuters) – Chinese state-backed media group CMC Inc said on Tuesday that it had raised around 10 billion yuan ($ 1.49 billion) in a fund-raising round from investors including rival tech giants Alibaba Group Holding Ltd and Tencent Holdings Ltd.
CMC, formerly CMC Holdings which stretches from sports to amusement parks, said the A-round fundraising was led by the two tech firms along with new investors such as property developer China Vanke Co Ltd.
CMC, founded by media magnate Li Ruigang in 2015, added the firm was valued at around 400 billion yuan after the round.
Reporting by Adam Jourdan; Editing by Muralikumar Anantharaman
HONG KONG (Reuters) – Tencent Holdings chairman pledged to advance China’s semiconductor industry, saying the blow to ZTE Corp from Washington’s ban on U.S. firms supplying telecommunications company was a “wake-up” call, local media reported.
China’s No.2 telecom equipment maker ZTE was banned in April from buying U.S. technology components for seven years for breaking an agreement reached after it violated U.S. sanctions against Iran and North Korea. American firms are estimated to provide 25-30 percent of the components used in ZTE’s equipment.
While the U.S. administration said on Friday it had reached a deal to put ZTE back in business after the company pays a $ 1.3 billion fine and makes management changes, the plan has run into resistance in Congress, indicating ZTE was still far from out of the woods. Also, ZTE is yet to confirm the deal.
“The recent ZTE incident made everyone more clearly realize that however advanced one may be in mobile payment, without the mobile, the chips and the operating system, you still cannot compete,” Chinese media reports cited Tecent’s Pony Ma as saying at a forum in Shenzhen on Saturday.
Tencent, which alternates with Alibaba Group to be Asia’s most-valuable listed company, is the largest social media and gaming company in China and operates the popular WeChat app.
Ma said “even though the ZTE situation was in the process of being resolved, we must not lose vigilance at this time and should pay more attention to fundamental scientific research”.
Tencent is looking into ways it could help advance China’s domestic chip industry, which could include leveraging its huge data demand to urge domestic chip suppliers to come up with better solutions, or using its WeChat platform to support application developments based on Chinese chips, Ma said.
“It would probably be better if we could get in to support semiconductor R&D, but that is perhaps admittedly not our strong suit and may need the help of others in the supply chain.”
China has been looking to accelerate plans to develop its semiconductor market to reduce its heavy reliance on imports and has invited overseas investors to invest in the country’s top state-backed chip fund.
Reporting by Sijia Jiang; Editing by Himani Sarkar
HONG KONG (Reuters) – China’s Tencent Holdings Ltd (0700.HK) saw its shares down 4.51 percent at the midday trading break on Friday after the internet firm’s largest shareholder, Naspers Ltd (NPNJn.J), said it would lower its stake for the first time in 17 years.
The Hong Kong-listed stock opened 7.8 percent lower at HK$ 405, its lowest opening price since Feb. 9, before regaining ground to HK$ 419.6 by noon. The benchmark Hang Seng Index .HSI was down 2.81 percent.
A day earlier, the stock fell 5 percent following Tencent’s late Wednesday report showing quarterly revenue missed estimates as well as expectations of margin pressure, although profit beat forecasts.
Friday’s decline wiped $ 24 billion (17 billion pounds) off Tencent’s market value, though at $ 508 billion, it is still Asia’s most valuable listed company and fifth globally behind Apple Inc (AAPL.O), Alphabet Inc (GOOGL.O), Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O).
South African media and e-commerce group Naspers said on Thursday it planned to sell up to 190 million Tencent shares, or 2 percent of its holding, in a sale that could earn Naspers up to $ 11 billion. It also said it had no plans to further reduce its holding for the next three years.
“The funds will reinforce Naspers’ balance sheet and be invested in classifieds, online food delivery and fintech globally,” said CICC analyst Natalie Wu. “We think it is a good opportunity to buy into dips given Tencent’s solid fundamentals.”
Jefferies analyst Karen Chan said, “Given Naspers’ largest single shareholding and board representation in Tencent, we believe its stake sale is unlikely to be a reaction to Tencent’s quarterly results. Instead of a timed profit-taking move, we believe this is more to improve Naspers’ own free cash flow and allow it higher flexibility in pursuing investment opportunities.”
A Tencent spokeswoman said it was informed and supportive of Naspers’ decision, and that Naspers’ intention to keep its remaining stake for the next three years demonstrated its confidence in Tencent.
Reporting by Sijia Jiang and Donny Kwok; Editing by Paul Tait and Christopher Cushing
This will be a four-part series on China’s rapid technological growth in the past few years. Each part will focus on a different investment you could make today in order to get a piece of China’s booming technology sector.
If you spend any amount of time in Beijing or Shanghai, you’ll notice something interesting almost right away. No one is carrying cash or credit cards, and almost no one uses their cellphone number as their primary means of communication. Instead, they’re using an app called WeChat, which is similar to having Facebook (FB), PayPal (NASDAQ:PYPL), Skype, and text messaging all bundled together into one app. Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) owns this application, which has over 950 million active users.
Tencent’s revenue growth has been astounding, and analysts expect that trend to continue into the future:
The reason for this massive growth is because Tencent owns people’s screen time in China. Whether you’re paying bills, playing a game, talking with friends, or hailing a taxi, you never have to leave Tencent’s world.
Speaking of games, Tencent also just happens to be the world’s leader in mobile gaming based on revenues. It’s currently ahead of Apple (AAPL), Microsoft (MSFT), Sony (SNE), King (KING), Electronic Arts (EA), Zynga (ZNGA), etc. What’s even more impressive is that despite being the top player in this area, it still grew its gaming revenue by 39% in the past year, and its market share in the space is continuing to increase.
Tencent has accomplished this dominance in the gaming sphere by partnering with a lot of the major players in the space to bring online versions of FIFA, Call of Duty, NBA 2K, and other extremely popular games to China.
Another interesting area where Tencent operates is streaming. Basketball is a perfect example of its foresight into this space. The popularity of the sport in China has exploded over the past decade, thanks in large part to Yao Ming. So what did Tencent do? It went out and struck a deal with the NBA to stream games in China. 65 million people watched the NBA finals last year from their phones in China through Tencent.
Besides gaming and streaming, Tencent’s other two major areas are social networks and advertising, which grew by 51% and 55% in the past year, respectively. Tencent is a $ 488 billion company that is still growing like a start-up. If you scroll back to the revenue chart above, you’ll see that the company’s revenue is expected to double by 2019.
Tencent’s social networks are particularly interesting to me. We’ve already discussed WeChat a little, but it has another app called QQ that has 850 million active users. Both QQ and WeChat together dominate China’s mobile payment space. Today, QQ and WeChat have over 300 million bank accounts linked to their mobile payment system.
As if all this wasn’t enough, QQ also has an application called QQMusic, which is considered to be the Spotify of China. This is an area where I anticipate Tencent will see a lot of growth moving forward.
Tencent has numerous potential catalysts that could push the stock price higher, but there are a handful that I want to specifically point out that are quite promising.
The first is in the gaming space, specifically with e-sports. China has the world’s largest video game market, which is expected to generate about $ 27.5 billion in sales this year. This incredibly large video game market has spurred an immense interest in e-sports in China and other Asian countries. In fact, the Olympic Council of Asia recently announced that it would be including e-sports at the Asian Games in Hangzhou in 2022.
E-sports have grown so popular in Asia that a crowd of more than 40,000 people recently packed into a stadium to watch two of South Korea’s biggest gaming stars play each other head-to-head. Tencent has a stranglehold on this market. The company recently signed a deal with the city of Wuhu to build an e-sports university and a stadium for events.
Tao Junyin, the market director of a top e-sports content company recently said, “Tencent has a controlling power in the whole industry, so we have to find a way to work with Tencent. You either die or you go Tencent.” Tencent has a stranglehold on the e-sports market in Asia and will benefit tremendously from its rapid growth.
Another area where the company could see growth is the music streaming space. Tencent owns QQ music, KuGou, and Kuwo, which together make up over 75% of China’s music streaming market.
Tencent has exclusive online distribution deals with Sony Music, Warner Music Group, and Universal Music Group. Its deals with the three largest music labels and dominance of market share put Tencent in a great position to control China’s music streaming market, which is relatively immature at the moment.
While China is the world’s most populous country, with over 1.3 billion people, it is only 12th in the world in terms of recorded music revenue. That’s up from 14th in 2015 according to the International Federation of Phonographic Industry (IFPI). This jump was largely due to the 30.6% growth in streaming and China’s 20.3% growth in music revenue, which was almost four times the 2016 global average of 5.9%.
Despite these impressive growth numbers, China’s music industry is still lagging behind the rest of the world. This gap won’t last forever, and as China begins to catch up with everyone else, Tencent stands to be the main beneficiary.
Finally, I just wanted to quickly point out that China’s mobile internet use is only expected to grow faster in the coming years, something that will clearly benefit Tencent.
There are two main risks I want to point out before you invest your money into Tencent. The first is its valuation. After everything we just discussed, it should be no surprise that you’re going to have to pay a premium to get into this name. Tencent’s 51.69 P/E ratio currently reflects that.
Tencent has enjoyed a nice run-up over the past year, so some short to medium-term weakness certainly wouldn’t surprise me. If you plan on investing money that you may need within the next year, Tencent might not be the best investment for you. That being said, I’m a long-term investor, so some short to medium-term weakness would allow me to add to my current position at a cheaper price.
The second risk comes with investing in almost any Chinese company, and that’s the risk of regulation. Any regulations in China dealing with the internet could make life more difficult for Tencent and potentially limit its capabilities.
Tencent seems to be doing everything right. They are major players in almost every facet of China’s tech revolution, which is why some people expect Tencent to become the world’s biggest company by 2025.
If you want to own some of China’s technology revolution, Tencent is one of the best places to start. Stay tuned for Part 2 of this series coming in the next few days.
Author’s note: If you would like to follow along with my China Series and other analysis, I would encourage you to hit the follow button next to my name at the top of the page. I enjoy interacting with my followers, so please comment below!
Disclosure: I am/we are long TCEHY.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
(Reuters) – China’s Tencent Holdings Ltd has bought a 12 percent stake in Snapchat parent Snap Inc, a regulatory filing showed on Wednesday.
Snap said Tencent acquired 145.8 million shares of its non-voting Class A common stock through open market purchases this month. bit.ly/2zqvybE
Snap had about 1.2 billion shares outstanding.
Reporting by Arjun Panchadar in Bengaluru; Editing by Sai Sachin Ravikumar
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