Solid 2Q results put Tencent on path to more investments

Internet giant to seek out more investments after registering big second-quarter gains in profit

PUBLISHED : Thursday, 16 August, 2012, 12:00am
UPDATED : Thursday, 16 August, 2012, 3:54am

Tencent, China's biggest internet company, will push forward with more strategic investments after delivering hefty gains in net profit and revenue last quarter.

In a filing with the Hong Kong stock exchange yesterday, chairman and chief executive Ma Huateng said Tencent's second-quarter net profit rose 32 per cent to 3.10 billion yuan (HK$3.79 billion) from a year earlier on the back of strong income from online games and advertising.

The solid result was roughly in line with the average estimate of 3 billion yuan in a Reuters poll of eight analysts.

Shenzhen-based Tencent, which reorganised its operations into six new business groups in May, posted a 56 per cent increase in revenue to 10.53 billion yuan from the previous year.

"We delivered another solid set of revenue and earnings results during the second quarter of 2012 despite a more challenging macro environment," Ma said.

Tencent's interactive value-added services business, which includes its domestic market-leading online games operation, grew 44.6 per cent to 7.78 billion yuan from a year ago.

This business accounted for 74 per cent of the company's total second-quarter revenue.

Online advertising climbed 71.7 per cent to 879.7 million yuan from the previous year, benefiting from growth in campaigns on Tencent's social networks and online video platform.

Ma pointed out that Tencent's recent reorganisation aimed to reinforce the company's "entrepreneurial spirit, execution and innovation, and sharpen each group's focus on addressing its target users' needs".

These business groups are corporate development, interactive entertainment, mobile internet, online media, social network, and technology and engineering.

"We will continue to invest in innovations and technologies to provide our users with [an] even better user experience," Ma said.

Last month, Tencent announced a multi-year deal with games publisher Activision Blizzard to exclusively operate the United States-based company's Call of Duty Online title on the mainland.

A report by JPMorgan said the Call of Duty Online deal would introduce "a new gaming model designed specifically for the Chinese market".

Players will be allowed to personalise their weapons, characters and equipment using an in-game store built for Tencent's target audience.

Tencent's share price dipped 0.17 per cent yesterday to close at HK$230.