Tencent bows to the new paradigm amid slowest growth ever

Tencent (0700) saw its adjusted fourth-quarter net profit drop 25 percent year-on-year to 24.9 billion yuan (HK$30.6 billion), while adjusted profit last year inched up only 1 percent to 123.8 billion yuan. Both figures were worse than estimated.

Revenue for the whole year jumped 16 percent to 560 billion yuan, also at its slowest-ever pace. Income from value-added services last year rose by 10 percent to 291.6 billion yuan, of which domestic games revenue went up 6 percent to 128.8 billion yuan.

The tech giant said the implementation of minor protection measures is directly affecting its domestic game revenue but it expects to fully digest the impact in the second half of this year.

It believes it will benefit from more new game launches when the regulators resume new-game approvals.

In the December quarter, online advertising brought the firm only 21.5 billion yuan in revenue, 13 percent less than a year ago, mainly due to the weakness in advertiser categories, including education, games, and internet services.

It expects the advertising business to resume growth in late 2022 after adapting to regulatory changes and the evolving macroeconomic environment.

"We are proactively embracing changes to better align ourselves with the new industry paradigm," president Martin Lau said in a conference call after the results. "We have a long-term oriented corporate culture that focuses on user value, social responsibility, technology innovations and compliance, the key elements for sustainable and healthy growth."

The company also waved aside speculation it will embark on a share-buyback program like rival Alibaba (9988) announced this week, saying it will focus instead on core businesses like international games, cloud services and its WeChat messaging service, developing new games for its pipeline when the regulatory environment stabilizes later in 2022.

Anli Securities chairman and chief executive Andrew Wong Wai-hong said investors are disappointed since no repurchase plan was announced and Tencent's share price will be under pressure in the short run.

Meanwhile, data from digital and mobile intelligence firm Sensor Tower showed mobile game players spent US$430 million (HK$3.35 billion) on Tencent's hit games Honor of Kings and PUBG Mobile last month, which were the top two games by global consumer spending across the App Store and Google Play.