Profit at tech firm Tencent up 60pc in first quarter year on year

Strength of mobile applications after only a couple of quarters helps propel mainland's largest listed tech firm to 60pc quarterly income rise

PUBLISHED : Thursday, 15 May, 2014, 1:43am
UPDATED : Thursday, 15 May, 2014, 1:43am

Tencent posted a better-than-expected 60 per cent rise in net profit year on year in the first quarter, helped by strong growth in online games via its mobile applications.

Net profit of the country's largest listed tech firm reached 6.46 billion yuan, a record. Revenue increased 36 per cent to 18.4 billion yuan, the fastest growth in three years.

Revenue from value-added services, mainly online games, increased 35 per cent to 14.4 billion yuan from the same period a year before. Smartphone games revenue tripled to more than 1.8 billion yuan from the previous quarter, according to the company.

Liu Xingliang, chairman of Hongmai Software, a Beijing-based internet data analysis firm, said Tencent has started to boost the smartphone game business through WeChat, or Weixin in Chinese, the mainland's most widely used mobile messaging service. "It is becoming an important revenue driver," Liu said.

Praveen Menon, technology analyst at Bloomberg Industries, said Tencent's tripling of its mobile game revenue in only a couple of quarters since introducing games in WeChat is "impressive" given "how personal computer game peers have struggled with mobile transition".

The Shenzhen-based firm said in a filing to the Hong Kong stock exchange that "the online game business benefited from new contributions from smartphone games integrated with Mobile QQ and Weixin".

The number of monthly active users of WeChat rose 87 per cent in the first quarter over the same period a year earlier to 395.8 million. However, monetisation via the smartphone platform has slowed since Beijing in March began a series of regulatory measures covering online payment and internet financial services.

The measures include blocking plans by Tencent and e-commerce giant Alibaba to offer virtual credit cards, suspending the use of so-called Quick Response codes for payment purposes, and drafting a cap on the amount online payment tools can spend and transfer.

Tencent stock has now dropped 19 per cent from its record high in March.

Liu said the People's Bank of China made it clear that these measures are "temporary".

"In the long run, online payment and internet finance are an irreversible trend and the government will allow the services when the related security issues are sorted," Liu said.

Yesterday, shareholders approved the company's proposal of a one to five stock split as Tencent tries not to shut out individual investors with a high stock price.

Shares of the company rose 1.3 per cent to close at HK$514 yesterday, while the benchmark Hang Seng Index went up 1 per cent.

Tencent and rival Alibaba have announced 61 acquisitions and investments totalling US$24.5 billion since 2012.