Sina Hong Kong Stock News November 14 reported that Tencent's third-quarter revenue and net profit fell short of expectations. The stock price was 2.26% lower, and the price was HK$320.
Under non-international GAAP, Tencent's net profit was $24.412 billion, up 24% year on year, slightly lower than expected. Total online game revenue for the third quarter increased 11% year on year to 28.6 billion yuan; total smartphone game revenue increased 25% year on year to 24.3 billion yuan.
Tencent Q3 performance review
1)Tencent HoldingsNet profit for the first three quarters was 71,728 billion yuan, compared to 64.49 billion yuan for the same period last year. Revenue for the third quarter was 97.236 billion yuan, with market expectations of 98.17 billion yuan, up 21% year on year; net profit for the third quarter was 20.38 billion yuan, with market expectations of 23.448 billion yuan, down 13% year on year. Under non-international GAAP, Tencent's net profit was $24.412 billion, up 24% year on year.
2) The market focused on the performance of the mobile game “Peace Elite” during the season. Smartphone game revenue increased 25% year over year to 24.3 billion yuan. The increase was due to the strong performance of major mainland games and the increase in the contribution of overseas games. Online game revenue for the third quarter increased 11% year-on-year to 28.6 billion yuan, and declined somewhat. UBS said: Tencent's mobile game business revenue during the quarter was only in line with expectations, but its share of the international market rose to double digits. Driven by the new game, the share is expected to continue to rise next year.
Qin Yue, assistant vice president of the China-Thailand International Research Department, said: There is a clear recovery trend in the mobile game business that has received market attention. In particular, the company revealed that the international market's revenue contribution has exceeded 10% of game revenue. It is believed that the company has gradually been able to cope with the opportunities and challenges of different markets. This will open up a larger market for games while reducing the possible impact of domestic market policy risks
2) Online advertising revenue in the third quarter increased 13% year-on-year to 18.4 billion yuan, mainly due to strong demand from advertisers in the vertical fields of gaming, education and e-commerce, offsetting the weak advertising demand in the automotive industry. However, media advertising revenue fell 28% year over year to 3.7 billion yuan. The decline was mainly due to the decline in video investment advertising revenue due to uncertainty about content distribution.
UBS said that the revenue of the online advertising business in the third quarter increased 13% year on year, higher than the bank's forecast of 3.7%, mainly driven by a 31.9% increase in social and other advertising revenue, while media advertising revenue fell 28.3%. It is expected that media advertising revenue will recover next year.
Lin Jiaheng, managing director of Guonong Securities, said: In terms of advertising business, he believes that the major trend in the future will be that online advertising will replace paper media, and it is expected that Tencent's advertising revenue will continue to rise steadily over the next three to five years.
Qin Yue said, “The performance of the online advertising business is average, mainly being dragged down by the decline in media advertising revenue. We think this has something to do with macroeconomics and market competition, and will be pressured in the short term. However, we are optimistic about social and other advertising because users of the WeChat Mini Program have developed habits and are highly attractive to advertisers. It is expected that the macroeconomic impact will be relatively small, and there is still room for growth on the supply side.
3) In terms of fintech services, as user activity and cash flow increased, the number of daily active accounts, transaction volume per user, and number of active merchants in various industries all increased. As a result, the number of commercial payment transactions and transaction amounts all recorded strong growth. The group's payment ecosystem is becoming more and more prosperous, with fintech and corporate services revenue of 26.8 billion yuan during the quarter, an increase of 36% year-on-year. UBS said: In terms of fintech and corporate services, revenue and gross margin both beat the company's expectations.
Qin Yue said: In 3Q19, revenue growth in fintech and corporate services was strong, and the revenue share further increased to 27.5%. Relay games became an important driving force for the company's growth. Payments, Wealth Connect, and Cloud all performed well. He believes that the effects of the strategic upgrade will become more obvious in the future. However, we believe that the policy risk of this business is also relatively high.
Lin Jiaheng, managing director of Guonong Securities, said: In terms of fintech business, although Tencent's performance is inferior to that of its peer Alibaba, he warned that Tencent's recent spin-off of subsidiaries and superiors has enabled the market to better grasp its asset content, but Alibaba's asset value is relatively erratic, so Tencent will not necessarily lose its color.
4) In terms of enterprise services, cloud revenue in the third quarter increased 80% year-on-year to 4.7 billion yuan, mainly due to the increase in usage by existing customers and the expansion of the customer base in education, finance, livelihood services, and retail. For example, Tencent Cloud received an operating contract for a smart education cloud platform in Shenzhen's Luohu District, which is the largest software-only project in the vertical field of education in mainland China.
5) In terms of the number of users, the combined monthly active accounts of WeChat and WeChat in the third quarter reached 1.151 billion, an increase of 6% year-on-year. QQ's monthly active smart terminal accounts were 653.4 million, down 6% from the same period last year. At the same time, Tencent upgraded its security policy and proactively cleaned up accounts with spam and malicious bot activity.
What do institutions think, can Tencent buy it?
We found that Tencent's stock price has fluctuated a lot since this year, with an increase of only 2% since this year. It is similar to the trend of the Hang Seng Index, which has frequent problems, and is far less than the company's previous impressive performance. Recently, the company's market value has also dropped from a high of 578.7 billion US dollars to less than 400 billion US dollars at present. The latest market value is 390.1 billion US dollars, and the stock price has also plummeted 32% from a high point.
Qin Yue said, “We think Tencent's 3Q19 performance is mixed. Overall, we are still optimistic about the company's medium- to long-term development. In terms of stock prices, it is expected that in the near future, mainly due to market performance, the recovery of mobile games, and the rapid development of fintech and corporate services businesses, there is an opportunity to give the market more confidence in terms of performance in the fourth quarter or next year.
Wen Tianna, CEO of Boda Capital International, said: Analyzing that Tencent's profit for the first three quarters increased 11% year on year, and revenue increased 19% year on year. However, if we analyze the quarterly data for the third quarter, profit fell 13% year on year and revenue increased 21% year on year. The author believes that Tencent's performance is poor compared to earlier expectations. Furthermore, the Mainland's mobile game policy is constantly changing, so it is necessary to pay attention to the impact of policy aspects on financial data in the fourth quarter. Tencent's performance was lower than expected. Also, as a weighted stock, it was more affected by hedge fund trading. In addition to the recent impact of local factors on Hong Kong stocks, stock prices were affected and pressured in the short term.
Lin Jiaheng, managing director of Guonong Securities, said, “There has been a crackdown on mobile game development in the mainland over the past year, so it is normal for Tencent to grow in the context of a low base figure, but even if the central government's current review of mobile games is relaxed, there will only be more restrictions in the future, especially for mobile content. It is expected that the online game business will grow at a relatively moderate pace. In terms of stock price deployment, he pointed out that Tencent's performance fell slightly short of market expectations and is expected to drop by at least 10 yuan today. There is no need to rush to enter the market; there is no need to rush into the market; it is better to wait until it falls back to 312 yuan to 315 yuan before being absorbed.
Bank of Communications InternationalAccording to the published research report, Tencent's third-quarter revenue was 97.2 billion yuan, up 21% year on year, falling short of the bank's expectations by 2%, some of which was offset by the rapidly growing cloud business. However, its adjusted earnings per share were RMB 2.55, in line with the company's expectations. The bank lowered its target price from HK$403 to HK$401, maintaining its “buy” rating.
According to a report released by UBS, Tencent Holdings' profit for the third quarter of 2019 was better than expected, with revenue of 97.2 billion yuan, 1% lower than market expectations, but 1.1% higher than expectations, while EBITDA was 38.1 billion yuan, 4.8% and 1.6% higher than the bank's and market expectations, respectively. Maintaining its “buy” rating, the target price is HK$410.
According to a research report published by Nomura, Tencent (0700.HK)'s third quarter results are generally in line with expectations, and the fourth quarter outlook is improving. Its third-quarter revenue increased 21% year-on-year, and non-GAAP earnings per share (non-GAAP) earnings per share increased 24% year over year), all in line with the company's expectations, but were slightly lower than market expectations of 2% and 3%, respectively. The bank reiterated its “buy” investment rating for Tencent and its target price of HK$428.
J.P. Morgan said: With the further increase in revenue from the mobile game business, the stabilization of media advertising, and the increase in the profit level of fintech and business services, the profit growth rate may accelerate to more than 30% in the next few quarters. The target price was lowered from HK$450 to HK$415, and the rating “increased holdings.”
According to a report released by Daimo, Tencent (00700) announced third-quarter revenue of 97.2 billion yuan, up 21% year on year (up 9% month on month), in line with the company's expectations and about 2% lower than market peers; gross margin was 44%, lower than the bank's original forecast of 46%. The forecast was mainly due to the low gross margin of value-added business. Maintain the “increased holdings” investment rating for Tencent, with a target price of HK$430.
