Earnings reports
image

Hong Kong company reporting season

Internet giant Tencent to sharpen focus on advertising, new tech investments after record year

PUBLISHED : Wednesday, 22 March, 2017, 7:01pm
UPDATED : Wednesday, 22 March, 2017, 11:46pm

Tencent Holdings, Asia’s largest company by market value, plans to sharpen its focus on advertising and major technology investments like artificial intelligence, after posting record-high net profit and revenue last year on the back of its smartphone games business.

“We launched a number of successful self-developed and licensed games, and solidified our position as the leading games company globally,” Tencent chairman and chief executive Pony Ma Huateng said on Wednesday.

At the end of December, Tencent’s Honour of Kings smartphone game achieved a domestic record of more than 50 million daily active user accounts, the company said.

Ma said Tencent “will not hurry or over-exploit the potential of social media advertising” on its popular platforms QQ and WeChat.

Shenzhen-based Tencent posted a 43 per cent increase in net profit last year to 41.1 billion yuan (US$5.9 billion), up from 28.8 billion yuan in 2015, as its games revenue grew 16 per cent year on year and advertising turnover rose 19 per cent.

The steady growth of Tencent’s QQ and WeChat platforms has helped expand distribution of its games and advertising to a large population
Pacific Epoch analyst Benjamin Wu

Total revenue soared 48 per cent to 151.9 billion yuan from 102.9 billion yuan a year earlier.

Its net profit missed the 44.1 billion yuan consensus market estimate from analysts polled by Bloomberg, but revenue was in line with the 152.1 billion yuan projection.

Tencent’s share price slipped 1.57 per cent on Wednesday to HK$225.20, which put its market capitalisation at HK$2.1 trillion.

Tencent president Martin Lau Chi-ping confirmed that China Reading, the country’s biggest online publishing and e-book company, will seek its initial public offering in Hong Kong. It reportedly aims to raise up to US$800 million.

China Reading, which was formed from the merger of Tencent Literature and Shanda Cloudary in 2015, has “great value for the movie, entertainment and gaming industries” because of its large number of popular books and intellectual property, Lau said.

Founded in 1998, Tencent’s business lines include online and mobile games, online advertising, social networking and digital content subscription services.

The company took the top spot in the world’s 52 highest-earning game publishers last year on Apple’s iOS and Google Play stores, according to the annual rankings of mobile apps research firm App Annie.

“The steady growth of Tencent’s QQ and WeChat platforms has also helped expand distribution of its games and advertising to a large population,” Pacific Epoch analyst Benjamin Wu said.

Tencent to trial paid subscription content in effort to monetise WeChat accounts

Monthly active users on social messaging platform WeChat, called Weixin on the mainland, reached 889 million last year, while social media platform QQ had 868 million.

Commenting on the country’s boycott of South Korean goods, Lau said it would delay Tencent’s launch of a few new online games, but would have no major impact on the overall business.

Tencent expected the costs of running its popular mobile payment services to stay high in the near term, as it further improves the user experience. “Profitability will not be our main goal,” Lau said.

Ma pointed out that Tencent will “invest heavily in cutting-edge technologies such as security, cloud, big data and artificial intelligence to position us for the next wave of growth”.

Putting huge resources into those initiatives would likely heat up Tencent’s rivalry with internet peers Alibaba Group and Baidu.

E-commerce powerhouse Alibaba, which owns the South China Morning Post, operates China’s largest cloud computing company, Alibaba Cloud. Baidu, the country’s top online search service, has ambitions to become a global leader in artificial intelligence and autonomous driving technologies.