Tencent net jumps 17pc to 44b yuan

Business | Tereza Cai 15 Aug 2019

Mainland tech giant Tencent's (0700) Non-GAAP net profit jumped 17 percent year-on-year to 44.46 billion yuan (HK$49.71 billion) for the six months ended June 30, beating the market consensus of 44 billion yuan, without an interim dividend.

Tencent's ADR was trading 4.15 percent lower at US$41.56 as of 10pm last night.

The second-quarter non-GAAP net profit amounted to 23.5 billion yuan, up 19.7 percent year-on-year and up 12 percent as compared with the first quarter this year.

It is 3 percent higher than the consensus as a result of better-than-expected other income segments, according to Ken Chong, equity associate at Jefferies Hong Kong.

Basic earnings per share rose 35 percent to 2.550 yuan, while under non-GAAP accounting policies, basic earnings rose 19 percent to 2.486 yuan.

Total revenue grew 21 percent year-on-year to 88.8 billion yuan for the three months from April to June, 5 percent below consensus, with 54 percent contributed by value-added services.

The VAS subscriptions grew 10 percent from a year ago to 168.9 billion. Tencent Video subscription counts were 96.9 million, up 30 percent year-on-year. Revenue from this segment rose 14 percent year-on-year to 48.08 billion yuan for the second quarter, but down 2 percent as compared with the first quarter.

The company said it will leverage its affluent intellectual property and content creation platform, with partnerships of China Literature (0772) and Tencent games, to develop the videos business.

Online games revenues grew 18 percent year-on-year to 27.31 billion yuan. The increase was primarily due to revenue growth from smartphone games, which was up 26 percent year-on-year to 22.2 billion yuan, in line with Jefferies Hong Kong's estimates.

Despite increased cash receipts, PC games revenue was down 15 percent quarter-on-quarter due to weak seasonality in the second quarter and declined by 9 percent year-on-year to 11.7 billion yuan, 7 percent behind Jefferies Hong Kong's estimates.

About 26 percent of the total revenue for the three months ended June 30 were from fintech and business services, whose revenue rose 37 percent from last year to 22.9 billion yuan, 4 percent behind Jefferies Hong Kong estimates, while 18 percent were from online advertising, which grew 16 percent year-on-year to 16.4 billion yuan in revenue, 3 percent short of Jefferies Hong Kong estimates.

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