Tencent sees third-quarter profit rise 32 per cent to 7.45 billion yuan

Chinese internet giant plans to ratchet up investment in smartphone games and mobile payment initiatives

PUBLISHED : Tuesday, 10 November, 2015, 9:57pm
UPDATED : Wednesday, 11 November, 2015, 1:48am

Chinese internet giant Tencent plans to ratchet up its investments in smartphone games and mobile payment initiatives, after the company defied a slowing mainland economy to post a record net profit in the third quarter of the year.

The solid performance is likely to have made Tencent more confident about the prospects of e-commerce partner JD.com, in which it has a 15 per cent stake, as it battles Alibaba in Wednesday’s much-anticipated Singles Day online-shopping event.

In a filing with the Hong Kong stock exchange after the market closed on Tuesday, Shenzhen-based Tencent reported a 32 per cent increase in third-quarter net profit to 7.45 billion yuan (HK$9.06 billion), up from 5.66 billion yuan in the same period last year, on the back of its strong advertising, online games and mobile payment businesses.

Our online advertising revenue continued to double year on year
Pony Ma Huateng, Tencent chairman

Total revenue grew 34 per cent to 26.59 billion yuan from 19.81 billion yuan in the third quarter of last year. That beat the 25.26 billion yuan average estimate of analysts surveyed by Thomson Reuters and the 25.4 billion yuan average estimate in a Bloomberg poll.

“Our smartphone games business accelerated growth, following the implementation of a new strategy that extends our product range. Our online advertising revenue continued to double year on year,” Pony Ma Huateng, the chairman and chief executive of Tencent, said on Tuesday.

He said smartphone games revenue rose 60 per cent year on year last quarter to 5.3 billion yuan as the company achieved or retained leadership in multiple genres, such as running, multiplayer online battle arena, shooting and board games.

Ma said the company would drive its smartphone games business by investing in new content based on its portfolio of online games, expansion into more game genres and fostering player communities.

Tencent teamed up with US-based Glu Mobile last week to bring its mainland-developed WeFire, China’s chart-topping and top-grossing smartphone shooter game, to international markets.

“For mobile payments, over 200 million users have bound their bank cards to our QQ Wallet and Weixin Pay services, and payment volumes have sharply increased, especially for person-to-person, e-commerce, and O2O [online-to-offline] transactions,” Ma said.

The company has continued to invest in deepening the mobile payment habit for users, despite significant bank handling fees on the consumer-to-consumer money transfers that it offers to users largely for free.

“We believe such cost represents a worthwhile investment for the future given the rapid growth in users binding their bank cards to their Weixin Pay or QQ Wallet accounts,” Ma said.

Combined monthly active users on its domestic Weixin and international WeChat mobile-messaging operations totalled 650 million last quarter.

“Tencent is our [China internet] sector top pick,” Alicia Yap, the head of China internet research at Barclays, said in a report. “It has significant monetisation potential from mobile advertising and mobile gaming.”