WHAT THE BROKER SAID

About a year ago DBS Vickers Securities initiated coverage of Tencent, the largest instant messaging provider in China, with a 'buy' recommendation. It set a 12-month price target on the stock of $5.20, compared with a price of $3.60 at the time.

The broker says Tencent was under-valued because two fast-growing businesses, casual games and enterprise instant messaging, were not reflected in its share price. The company was also well positioned as a key virtual telecommunications operator in China.

The company provided three core instant messaging products - for youth, for professionals and for corporates - which together had attracted more than 290 million registered users, the largest online community in China and possibly the world.

Trading at 11.3 times its 2004 price/earnings, Tencent was more attractive than peers at 25 times price/earnings.

Last month Tencent announced that revenue rose 20 per cent to 634.13 million yuan in the first half from a year ago. Net profit leapt 30 per cent to 283.92 million yuan. In the second quarter, QQ registered users rose 9.4 per cent over the first quarter to 438.4 million. The counter closed on Friday at $9.