EARNINGS PREVIEW
image

Tencent

Online games kingpin Tencent tipped for strong third quarter

Analysts forecast 57pc rise in net profit to 11.69bn yuan, with revenue predicted to grow 47pc to 39.02bn. The company reports on Wednesday

PUBLISHED : Tuesday, 15 November, 2016, 4:03pm
UPDATED : Tuesday, 15 November, 2016, 10:19pm

Chinese internet giant Tencent Holdings is widely expected to post another solid set of financial results for the three months ending September 30, driven by robust mobile games and online advertising revenue.

Analysts said Tencent will likely announce in Hong Kong on Wednesday third-quarter net profit and revenue that are broadly in line with market consensus estimates.

The Shenzhen-based company is forecast to see a 57 per cent increase in third-quarter net profit to 11.69 billion yuan (HK$13.24 billion), up from 7.44 billion yuan in the same period last year.

Total revenue was predicted to grow 47 per cent to 39.02 billion yuan from 26.59 billion yuan a year earlier.

“Tencent remains well-positioned to continue monetising the time users spend on social and entertainment content, as well as in capturing the shifting ad budget from traditional portals and TV to mobile, video and social platforms,” said Alicia Yap, the head of regional internet research at Citi Research in Hong Kong.

Tencent reports its games revenue under value-added services, which includes its QQ, Qzone and WeChat social platforms.

Last week Citi estimated that Tencent will deliver a net profit of 11.69 billion yuan and revenue of 38.64 billion yuan for the quarter to September. It has a “buy” rating on the company, with a target price of HK$230.

“We estimate third-quarter smartphone games gross revenue to grow 95 per cent year on year and 8 per cent quarter on quarter to 10.35 billion yuan, benefiting from the continued strength of Hero Moba and JX Online,” Yap said.

Developed by Tencent-owned Timi Studio Group, Hero Moba is a popular title in the video game genre known as multiplayer online battle arena. JX Online is a swordsman-themed role-playing mobile game licensed by Tencent from Kingsoft Corp.

Shi Jialong, an analyst at Nomura, predicted in a report last week that Tencent’s mobile gaming revenue in the third quarter would see an 87 per cent jump to 9.92 billion yuan from 5.3 billion yuan a year ago.

Nomura also maintains a “buy” rating on Tencent, with a target price of HK$235. Shares in Tencent inched ahead on Tuesday to reach HK$192.30.

Data from business intelligence firm App Annie showed that Tencent topped mobile game revenue on Apple’s iOS platform in mainland China from July to September, with mainland rivals NetEase and Perfect World trailing behind in the same period.

Yap expected Tencent’s third-quarter advertising revenue to climb 56 per cent to 7.68 billion yuan, up from 4.94 billion yuan the previous year, on strong regional demand and its “Moments” campaigns on WeChat, known as Weixin on the mainland. Moments are similar to advertising that appears on the timeline of Facebook users.