reports
- Chelsey Tam
The Timing of a Trade War Couldn't Be Worse for China
China has maintained its economic rebalancing to consumption through the first quarter. But this process remains slow, as the Chinese consumer is becoming challenged with higher levels of household debt, and the picture for consumption growth is looking increasingly muddied. Despite a solid first-quarter bump, fixed-asset investment remains far below former levels. Going forward, weaker real estate and state-led infrastructure spending will likely quell any further rebound. Meanwhile, a rise in ...
- Chelsey Tam
Chinese Internet giant Tencent is building an all-in-one platform.
Wide-moat Tencent’s strong net income beat in the fourth quarter was mainly because the income tax rate came in at 12.6% versus our 20.2% estimate and 21.7% in the third quarter, due to a reversal of income tax expense for certain high-tech subsidiaries that qualified for a lower corporate income tax rate. Revenue growth slowed to 51.4% in the quarter from 61.5% in the third quarter and was 6% lower than our expectations, led by lower-than-expected value-added services revenue. However, we thi...
- Chelsey Tam
Chinese Internet giant Tencent is building an all-in-one platform.
Wide-moat Tencent’s strong net income beat in the fourth quarter was mainly because the income tax rate came in at 12.6% versus our 20.2% estimate and 21.7% in the third quarter, due to a reversal of income tax expense for certain high-tech subsidiaries that qualified for a lower corporate income tax rate. Revenue growth slowed to 51.4% in the quarter from 61.5% in the third quarter and was 6% lower than our expectations, led by lower-than-expected value-added services revenue. However, we thi...
- Chelsey Tam
Upgrading Tencent to 4-Star Rating Despite Weaker-Than-Expected 4Q Rev...
Wide-moat Tencent’s strong net income beat in the fourth quarter was mainly because the income tax rate came in at 12.6% versus our 20.2% estimate and 21.7% in the third quarter, due to a reversal of income tax expense for certain high-tech subsidiaries that qualified for a lower corporate income tax rate. Revenue growth slowed to 51.4% in the quarter from 61.5% in the third quarter and was 6% lower than our expectations, led by lower-than-expected value-added services revenue. However, we thi...
- Chelsey Tam
Upgrading Tencent to 4-Star Rating Despite Weaker-Than-Expected 4Q Rev...
Wide-moat Tencent’s strong net income beat in the fourth quarter was mainly because the income tax rate came in at 12.6% versus our 20.2% estimate and 21.7% in the third quarter, due to a reversal of income tax expense for certain high-tech subsidiaries that qualified for a lower corporate income tax rate. Revenue growth slowed to 51.4% in the quarter from 61.5% in the third quarter and was 6% lower than our expectations, led by lower-than-expected value-added services revenue. However, we thi...
- Marie Sun
Increasing Tencent's Moat to Wide; New FVE Is HKD 311 or USD 40
We raise Tencent’s moat to wide from narrow as we anticipate the strong network and ecosystem it has built on its Weixin/WeChat and QQ platforms will drive prolonged profit and market position. The time spent by its users on WeChat is now around 66 minutes per day (according to Quest Mobile), up around 27% from the 2015 level and which exceeds the 50 minutes active users spend on Facebook by comparison. We think Tencent will continue to benefit from its massive user base and intangible assets ...
- Marie Sun
Tencent’s 1Q Results Surprised on the Upside; Increasing FVE to HKD ...
Tencent delivered strong top-line growth in the first quarter, up 55% year on year, which beat both our estimates and market consensus. The upside surprise was mainly due to strong sales in online games and digital content services, as well as the explosive growth of new initiatives, mainly cloud and payment services. However, the decline in the gross margin was faster than our expectation, owing to heavy spending on content, particularly video content. In the first quarter, the gross margin was...
- Marie Sun
Tencent Invests USD 1.78 Billion for 5% Stake of Tesla
Tencent became the fifth-largest shareholder of Tesla. According to Tesla’s public filings, Tencent acquired 8,167,544 shares at a total consideration of USD 1.78 billion through open market purchase on March 17. The purchase price is about USD 217 per share as per our calculation, which is lower than the current market price of USD 277.5 and higher than our U.S. analyst’s fair value estimate of USD 197. We believe that this shows Tencent’s ambition in the automobile industry, which has be...
- Marie Sun
Tencent’s Top-Line Slightly Missed, but We Believe its Long-Term Gro...
Tencent released mixed fourth-quarter results with top-line growth slightly missing our estimates but new initiatives such as payment and cloud on the right track. Although Weixin's mini program is still at an initial stage, it could become a useful tool on the Weixin platform for O2O services. The operating margin was 32%, which was 200 basis points lower than our estimates mainly due to higher promotion spending in newly released mobile games and payment services. Although the company has been...
- Marie Sun
Tencent Has Released 'Little Program' at Weixin; FVE Maintained at HKD...
Tencent’s Weixin released its "Little Program†as promised on Jan. 9, 2017; this is a new distribution channel for services and content at Weixin App. Little Program is user-friendly, and its purpose is to connect Weixin users with a variety of services and content without requiring them to download apps, which could occupy a lot of memory and be difficult to manage. We believe Little Program is a long-term positive for Tencent, and the program will further strengthen the firm's network effe...
- Marie Sun
Tencent’s Strong Network Effect is Intact Despite Margin Decline; In...
Tencent delivered strong top-line growth of 52% year on year in the third quarter, but the sequential decline of operating margin by over 400 basis points missed both our estimate and market consensus. We believe that Tencent’s strong network effect is intact, and the investment in grabbing more market share and Internet infrastructure services will eventually strengthen its economic moat. In the third quarter, the monthly active users of Weixin were 846 million, up 30% year on year. The aggre...
- Marie Sun
Initiating Coverage of Tencent ADR With FVE of USD 28 per ADR
We are initiating coverage of Tencent's ADRs (TCEHY US) with a fair value estimate of USD 28 per ADR, using a foreign exchange rate of 6.66 Chinese yuan/1 US dollar. We maintain our narrow moat and stable moat trend ratings and believe Tencent is a long-term winner in the Chinese Internet sector, with multileg growth drivers. Tencent has built up a comprehensive ecosystem centered in social networking in China. Weixin, the mobile messaging app launched in January 2011, has reached 806 million mo...
- Marie Sun
This Chinese Internet giant is building an all-in-one platform.
Tencent is China's largest Internet service provider based on its two key social networking platforms, Weixin and QQ. Through connecting users with content, services, and hardware, Tencent has won the loyalty of several hundred million subscribers. Weixin, the super mobile app launched in January 2011, has accumulated 806 million monthly active users in China. QQ, the earliest instant-messaging software in China (launched in 1999), replicated its success in mobile Internet, with 899 million mont...
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