Tencent’s online publishing unit posts US$32 million first-half profit after passing listing hearing

China’s largest online publishing and e-book company had an average of 192 million monthly active users as at the end of June

PUBLISHED : Monday, 16 October, 2017, 7:13pm
UPDATED : Monday, 16 October, 2017, 7:15pm

China Literature, the online publishing and e-book unit that Chinese tech giant Tencent plans to spin off and list in Hong Kong, reported Monday that its net profit reached 213.5 million yuan (US$32.4 million) in the first half of this year, swinging from a loss of 2.4 million yuan a year earlier.

The online publisher, in which Tencent has a 65.38 per cent stake, incurred losses of 21.13 million yuan and 354 million yuan, respectively, in 2014 and 2015, according to its post hearing information pack (PHIP), a near-final prospectus posted by a company on the Hong Kong stock exchange’s website after it finishes the listing hearing.

It lost 2.38 million yuan in the first half of 2016, but started making a profit in the second half. It finished 2016 with a net profit of 30.4 million yuan.

China Literature, which operates several of the country’s largest online literary portals, had 9.6 million literary works and an average of 191.8 million monthly active users (MAU) as at the end of June. More than 93 per cent of these MAUs accessed the platform from their mobile phones while the rest used computers.

By the end of 2016, it had 5.3 million writers on its platform, representing 88.3 per cent of all online literary writers in China.

China Literature’s biggest source of revenue comes from charging readers to access its online content.

It derived 84.9 per cent of its revenues from “online reading” in the first six months of this year, the online publisher said in the filing.

“Within China’s literature market, online literature has grown the fastest, experiencing a CAGR (compound annual growth rate) of 44.9 per cent from 2013 to 2016, and is projected to continue to grow at a CAGR of 30.9 per cent from 2016 to 2020,” China Literature said in the filing.

In 2016, the value of China’s online literature market was 4.6 billion yuan, accounting for 11.4 per cent of the total literature market, according to China Literature.

The share of literature published online is expected to grow to 22.7 per cent in 2020, the publisher said.

Other sources of revenue include intellectual property operations, printed books, online games and online advertising.

According to the PHIP, total revenue for the first half was 1.9 billion yuan, up 93 per cent from 1 billion yuan a year ago.

In 2016, revenues rose 60 per cent year on year to 2.56 billion yuan.

The Carlyle Group, the US alternative asset manager based in Washington, has a 12.89 per cent stake in China Literature.

China Literature also said its writers’ output covers a wide spectrum of reader interests, from mainstream genres featured in traditional publishing, to those genres that it says “are underserved in traditional publishing”, such as “xianxia”, or fantasy, novels that depict fairies and mystical heroes.

Previous reports by Thomson Reuters publication IFR said the initial public offering could raise between US$600 million and US$800 million.