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Tencent

Tencent may post record 2016 earnings with 32pc profit jump

Tencent’s 2016 earnings are likely to be bolstered by strong sales of smartphone games, and increasing advertising from China’s largest social network WeChat.

PUBLISHED : Monday, 20 March, 2017, 8:00am
UPDATED : Monday, 20 March, 2017, 8:00am

Tencent Holdings, Asia’s largest company by market value, is likely to report its 13th year of record sales and profit this week since being listed in Hong Kong, bolstered by strong smartphone games operations and increasing advertising revenue on China’s largest social messaging app WeChat.

The Shenzhen-based company’s revenue is expected to soar 47.9 per cent to 152.1 billion yuan (US$22 billion), pushing 2016 net profit higher by 32 per cent to 44.1 billion yuan, according to consensus estimates from analysts polled by Bloomberg.

That would be Tencent’s biggest percentage increase in revenue since 2012, when the company’s annual sales jumped 54 per cent.

“We see Tencent, likely to report broadly in-line results,” said Alicia Yap, the head of regional internet research at Citi Research in Hong Kong.

Tencent’s share price advanced about half a per cent on Friday to HK$222, its highest close since the company conducted a five-for-one share split on May 15, 2014 to attract small investors. That boosted its market capitalisation to HK$2.1 trillion, or US$268 billion.

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

Tencent’s top mobile game, Honour of Kings, was originally released on October 5, 2015. The game surged to become China’s top-grossing game in November 2016, “and has since held the position over the past four months”, Yap said.

Tencent also took the top spot among the world’s 52 highest-earning game publishers last year on Apple’s iOS and Google Play stores, according to the latest annual rankings published last week by mobile apps research firm App Annie.

Ranked second was Finnish mobile game developer Supercell, which was acquired by Tencent in an US$8.6 billion deal last year.

Tencent was estimated to have generated US$3.8 billion worth of digital advertising revenue last year, the bulk of which was mobile advertising, according to research firm eMarketer.

Yap said video advertising campaigns in Moments, the social-networking function on WeChat that enables users to share photos and website links, has also helped boost the firm’s advertising business.

WeChat, known as Weixin on the mainland, had 846 million monthly active user accounts as of September 30. The service is now an ubiquitous part of daily life on the mainland, enabling users do everything from hailing taxis to shopping, paying utility bills and navigating. It’s also widely used during occasions like Valentine’s Day and Lunar New Year for sending digitallai seepackets.

“WeChat payment has seen a fast ramp-up of mobile payment market share from only 11.4 per cent in the first quarter of 2015 to 38.1 per cent as of the third quarter last year,” Yap said.