Tencent Holdings (00700.HK) announced stellar results for the third quarter, with sales growth and profit both surpassing analyst forecasts, providing new momentum for its share price.
Revenue surged 61 percent in the three months to September to 65.2 billion yuan (US$9.8 billion), thanks to robust income from mobile games, particularly Honour of Kings.
The sales growth was the fastest the company recorded in seven years, according to Bloomberg.
Net income soared 69 percent to 18 billion yuan, the Chinese internet giant said in a filing to the Hong Kong Stock Exchange on Wednesday.
Analysts polled by Thomson Reuters had on average expected a profit figure of 15.18 billion yuan.
Games accounted for half of Tencent’s revenue in the third quarter. The success of the online battle arena game Honour of Kings helped expand the firm’s smartphone gaming revenue by 84 percent, reaching 18.2 billion yuan in the quarter, Bloomberg noted.
For 2018, the company has established a series of survival-themed mobile games that includes several from South Korean developers.
Tencent’s advertising revenue jumped 48 percent in the quarter from the previous year. Revenue from its “others” segment, which includes its mobile-payment and cloud businesses, more than doubled.
WeChat, Tencent’s messaging-to-payment super app, had 980 million monthly active users as of end-September, up nearly 16 percent from a year ago, with 38 billion messages sent daily.
The company’s YouTube equivalent, Tencent Video, has become the video streaming service with the largest paying subscriber base in China, at 43 million subscriptions.
“We don’t see any signs of slow down or deterioration for next quarter or 2018,” Naoshi Nema, an analyst at Cantor Fitzgerald in Hong Kong, told Bloomberg.
“Mobile games growth is strong and the company is hitting pay dirt in areas of payments, cloud and on-demand video subscription.”
Going forward, Tencent plans to invest more in online video through original content production or IP purchase, the company’s president, Martin Lau, said on an earnings call late Wednesday, according to Reuters.
Although it is not a profitable segment, the company will make the additional investments because it is core to Tencent’s cross-media intellectual property strategy and increases engagement time.
Tencent’s shares have doubled this year, making it Asia’s most valuable company with a market capitalization of US$476 billion as of Thursday.
The company recently listed several subsidiaries on stock exchanges in Hong Kong and the US in a slew of stellar initial public offerings.
Lau said more IPOs may come, but spin-offs similar to publishing arm China Literature (00772.HK), which this month raised US$1.1 billion, will not be the “norm”.
“Over time there will be more and more of our investee companies that reach the kind of maturity that can be IPO’ed in the market,” Reuters quoted Lau as saying.
“But I would say for the majority of our businesses, which have been homegrown and organic, there is actually more reason for them to stay together so they can reinforce each other.”
In other comments Wednesday, Lau said his firm wants closer relationship with US-based Snap, which operates the Snapchat messenger service.
Tencent holds 12 percent stake in Snap as part of a strategic investment in the American tech firm.
“When we look at Snap’s business we continue to feel there’s a lot of engagement with the end users,” Lau told analysts.
“That’s why we have taken up more shares and tried to establish a closer relationship, and over time we’re trying to see whether we can do something more strategic with them.”
Tencent shares closed up 2.3 percent at HK$391.80 in Hong Kong on Thursday, after surging as much as 2.8 percent during the day.
– Contact us at [email protected]