Published: Thu, May 17, 2018
Money | By Armando Alvarado

Tencent revenue tops estimates due to mobile games

Tencent revenue tops estimates due to mobile games

China's largest social media and gaming company posted a faster than expected 61 per cent jump in net income last quarter as growth on mobile bounced back, outstripping estimates by nearly a third. The company's revenue rose by 48 percent year-on-year while net profit was up by 61 percent for the same period.

Daiwa Securities raised its target price for Tencent to HK$530 from HK$490 on what it said was "a stellar set of results".

Strong mobile gaming revenue and 7.585 billion yuan in investment gains helped buoy its gross profit margin to 50.4 percent, the first sequential quarterly increase since the second quarter of 2015. That compares to the 17.4bn-yuan average of estimates compiled by Bloomberg. Shares in Naspers Ltd., which as Tencent's top shareholder is often regarded as a proxy for the Chinese firm, rose 2.6 percent in early Wednesday trade.

"The results were good even without the one-time gains, but the gains made it even better", said Bhavtosh Vajpayee, a Hong Kong-based research analyst at Bernstein.

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Tencent's gaming business has historically done well, with the PC games segment being the company's cash cow for a long time. Revenue grew by 48% from the same period previous year on the back of strong performance in its online advertising, gaming and messaging services. The essay, written by veteran tech editor Pan Luan, claimed the company had "lost its dream" by becoming an investment company instead of continuing to develop great products in core areas such as search, e-commerce, information streaming, short video and cloud services. Anchored by its marquee title, the smartphone games business yielded 68 percent growth in the quarter. It has developed a mobile version of the former that is available globally, while it owns almost half of Epic Games, the developer of Fortnite.

But overall costs surged 51 percent. The first is called "PlayerUnknown's Battlegrounds" or PUBG, which is a massive multiplayer online game.

Tencent Chairman and CEO Ma Huateng. WeChat had 1.04 billion monthly active users while the mobile version of QQ - the older of its two social networks - saw users drop 6.4 percent to 805.5 million at the end of the quarter.

Jefferies revised up its 2018 revenue target by 1 per cent and lowered the non-GAAP earnings forecast by 4 per cent to reflect a higher revenue contribution from ad and financial services, they wrote.

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