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Tencent

Tencent shares jump over 4 per cent in early Hong Kong trading after better-than-expected earnings

  • Social advertising and investment gains helped to offset gaming uncertainties due to government regulation issues
PUBLISHED : Thursday, 15 November, 2018, 10:12am
UPDATED : Thursday, 15 November, 2018, 11:36am

Tencent Holdings increased 4.3 per cent to open at HK$284 on Thursday in Hong Kong trading, after China’s internet giant posted better-than-expected third quarter profits overnight.

Tencent, the operator of China’s biggest social media and gaming businesses, posted a 30 per cent jump in third-quarter profit to US$3.4 billion as social advertising and investment gains helped to offset gaming uncertainties due to government regulation.

Tencent president Martin Lau struck a note of caution in an earnings call on Wednesday, saying that challenges lie ahead, including the pace of state approvals necessary to push ahead with the release of new game titles.

“We’re still waiting for the government to start the approval process for games, and when that is announced we’ll have an update for the market,” Lau said.

The Hong Kong-listed company reported net income of 23.33 billion yuan (US$3.4 billion) in the quarter ended September 30 compared to the 18.39 billion yuan average estimate of 12 analysts polled by Bloomberg. Profit increased 30 per cent year on year mainly due to higher gains generated from investment-related items, Tencent said.

Tencent posted 8.8 billion yuan in other net gains for the third quarter, mainly from increases in valuations of certain investments, including Meituan Dianping, the online food delivery-to-ticketing services platform, which listed in Hong Kong in September.

“Earnings have once again begun to beat expectations even on an adjusted basis with the investment book adding further to the bottom line performance,” said Douglas Morton, head of Asia research at Northern Trust Capital Markets in a note after the results.

“While they may fail to give comfort on the regulatory environment, current valuations imply a certain disregard for Tencent’s investment book and the long-term growth potential of Tencent’s new business strategies alongside advertising, all of which showed good results in the quarter.”

Meanwhile, in overall early trading, the major benchmarks inched ahead in Hong Kong and mainland China.

The Hang Seng Index was last up 0.3 per cent and the Shanghai Composite Index had gained about 0.7 per cent. The Hang Seng China Enterprises Index was treading water.

Apple-related stocks in Hong Kong were trading mixed: AAC Technologies was trading about 3 per cent down, while Fit Hon Teng, Tongda Group Holdings and Cowell e Holdings were flat.

Additional reporting by Cheryl Arcibal