Tencent net profit up 18.7pc in quarter

Mainland's largest internet company attributes gain to growth in advertisements and online games but profit still misses market forecasts

PUBLISHED : Wednesday, 14 August, 2013, 6:04pm
UPDATED : Thursday, 15 August, 2013, 3:18am

Tencent, the mainland's largest listed internet firm, said second-quarter net profit rose 18.7 per cent from a year earlier on robust growth in online games and advertising.

But the 3.68 billion yuan (HK$4.66 billion) in net earnings missed analysts' average estimates of 3.9 billion yuan, according to Bloomberg.

Hong Bo, a Beijing-based information-technology industry expert, said part of the reason was the heavy investment in promoting the company's leading instant messaging application for smartphones, WeChat.

"WeChat is laying the foundation for Tencent for the mobile internet era. It's normal to spend on promotion and research at this stage," Hong said.

Capital expenditure rose to 1.46 billion yuan from 915 million yuan in the same period last year. Revenue climbed to 14.38 billion yuan from 10.53 billion yuan.

"We continued to invest in new opportunities such as mobile platforms, e-commerce and international expansion," Tencent said in a statement filed with the Hong Kong stock exchange.

Competition among internet companies has intensified as the industry moves into the mobile era. The dotcom companies building games are acquiring related firms and developing mobile applications to lure users who are spending more time on their smartphones and tablets.

Tencent on Monday released an updated version of WeChat, which drove its share price up 3 per cent to HK$371. The stock closed at HK$370 on Tuesday, 100 times the price at which it was floated in 2004.

Xue Yongfeng, an analyst with research firm Analysys International, forecast further gains in the stock. "These days the share price of every internet company is driven by its performance in the mobile internet market," he said. "And Tencent has the country's most successful and most promising mobile internet product, WeChat."

Tencent has introduced a payment system to the latest version, as well as a gaming centre and an emoticon "sticker store".

These were first steps that Tencent had taken to cash in from a user pool of more than 300 million people, Xue said.

"With such a mighty scale of clients, it gives people huge space of imagination in terms of WeChat's monetisation," he said.

Currently, more than half of the firm's revenue is derived from online games.