Tencent blows past estimates as WeChat, games drive growth
Tencent blows past estimates as WeChat, games drive growth
Asia's most valuable company Tencent beats profit expectations with high score from mobile games
16 May, 2018, 21:45
Asia's second-most valuable listed company said on Wednesday net profit for the first quarter was 23.29 billion yuan (US$3.66 billion), beating the average analysts' estimate of 17.5 billion yuan.
"We expect Tencent to consolidate both the PC and mobile games markets", Alex Yao, a Hong Kong-based analyst at JPMorgan Chase & Co., said in a report. Tencent has exclusive release rights for PUBG in China but says the game is "yet to be monetized", implying future additional revenue stream from the title.
Its mobile game business reported a 68 per cent increase in revenue year-on-year to 21.7 billion yuan, driven by its blockbuster title Honour of Kings, which remained the highest-grossing smartphone game in China's iOS App Store, and a newly-released mobile game version of QQ Speed, which has a strong personal computer (PC) player base. Fortnite has been developed by video game developer Epic Games who Tencent has a stake in - the game is now unavailable in China, but there are plans to launch the game in the region in the coming months. The market had also anxious that Tencent's spending plans for its videos, artificial intelligence and mobile payments could hurt its margins.
The results are likely to please Tencent's army of investors.
Tencent has been on a shopping spree, expanding into different sectors including e-commerce and automobiles. Net profits increased 65% year-on-year to reach $3.82 billion on revenues of $11.7 billion in the three months to end of March. Shares in Naspers Ltd., which as Tencent's top shareholder is often regarded as a proxy for the Chinese firm, rose 2.6 percent in early Wednesday trade.
Social and other advertising sales increased 69 per cent year-on-year as a result of more advertisers on WeChat Moments, the social media platform within its hugely popular messaging service.
Over the past year Tencent has completed 62 deals involving direct investments and mergers and acquisitions, according to data compiled by Bloomberg.
In a battle for the world's largest mobile payment and retail market, Tencent has splashed out billions forging alliances with new partners like Carrefour and subsidising merchants to lure them onto its payment-to-messenger super app WeChat.
China's largest social network and gaming company defied fears that outsized spending would hammer margins. In retail and e-commerce - traditionally viewed as rival Alibaba Group's turf - it has splashed out billions since 2017 on deals at home and overseas.
Other earnings drivers for Tencent included a video subscription service that is similar to that of Netflix.
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