Source: Brokerage China
Author: Hu Feijun

On December 9, news from the Hong Kong Stock Exchange disclosed that on December 6, TENCENT's major shareholder, the South African Naspers Group's Dutch subsidiary Prosus, sold 474,000 shares of TENCENT Listed in Hong Kong, with an average price of 410 HKD per share, reducing its holding ratio from 24.01% to 23.99%, currently holding approximately 2.224 billion shares.

In fact, this year, the speed of Shareholding reduction by TENCENT's shareholder Prosus has slowed down. According to previous information, from early April to the end of September this year, the company reduced its holdings by about 70.5861 million shares of TENCENT, cashing out 3.3 billion USD; from October 1 to November 27, it further sold 26.4245 million shares, reducing its holdings to about 2.227 billion shares.

It is worth mentioning that TENCENT's performance has achieved steady growth this year, while there is significant room for Share Buyback, and the company's stock price has effectively resisted the pressure brought by the major shareholder's Shareholding reduction. As of the time of writing, $TENCENT (00700.HK)$ is reported at 423 HKD per share, which has increased by over 45% this year, with a total Market Cap of 3.92 trillion HKD.

TENCENT is facing a slight Shareholding reduction by its large South African Shareholder.

The Shareholding reduction actions from TENCENT's major Shareholder are progressing as expected.

The Hong Kong Stock Exchange disclosed that on December 6, TENCENT's major Shareholder, South Africa's Naspers Group Dutch subsidiary Prosus, sold 0.474 million shares of TENCENT Listed in Hong Kong at an average price of 410.0358 Hong Kong dollars per share, reducing its shareholding ratio from 24.01% to 23.99%, now holding approximately 2.224 billion shares.

According to Statistics, since the beginning of this year, Prosus has slowed down its reduction of TENCENT shares. As previously disclosed, from early April to the end of September, it reduced about 70.5861 million shares of TENCENT, cashing out 3.3 billion dollars; from October 1 to November 27, it further sold 26.4245 million shares, reducing its holding to around 2.227 billion shares.

The Earnings Reports show that by the end of 2023, TENCENT's South African major Shareholder Naspers reduced 0.21 billion shares through Prosus, with the shareholding ratio decreasing from 26.93% at the end of 2022 to 24.96% at the end of 2023.

Prosus's plan to reduce its shareholding in TENCENT can be traced back to June 27, 2022. According to TENCENT's announcement, Prosus and Naspers announced the launch of a long-term, open-ended Share Buyback plan to enhance the group's Net income per share. The funds for the buyback will be obtained through the orderly, slight sale of TENCENT stocks by the Naspers Group. Naspers expects that the number of TENCENT shares sold daily will not exceed 3% to 5% of TENCENT's average daily Volume. According to public data, Prosus and Naspers's main purpose is likely to address the serious inversion problem between their market value and asset value, using the funds from the reduction to support their own buyback plan.

Significant performance growth and intensified buyback.

Despite facing Shareholder reductions, TENCENT has withstood the pressure from Shareholder reductions by relying on robust performance and significant buyback actions.

In November of this year, TENCENT released its third quarter Earnings Reports, reporting revenue of 167.19 billion yuan, an increase of 8% year-on-year, while the market estimate was 167.93 billion yuan; TENCENT's net income for the third quarter was 53.23 billion yuan, up 47% year-on-year, with the market estimate being 45.33 billion yuan; the profit attributable to shareholders under non-International Financial Reporting Standards was 59.81 billion yuan, an increase of 33%.

It is reported that in the third quarter, TENCENT achieved steady growth in all three core businesses, benefiting from continuous product iteration, accelerated application of AI technology, and expansion into overseas markets. Meanwhile, TENCENT invested 17.9 billion yuan in R&D during the third quarter to drive the continuous iteration and upgrade of large models, thereby enhancing the competitiveness of its TO B products.

In the first three quarters, TENCENT's revenue was 487.81 billion yuan, representing a year-on-year growth of 7%; the profit attributable to shareholders under non-International Financial Reporting Standards was 167.39 billion yuan, an increase of 46%.

TENCENT's third quarter Earnings Reports also indicated that the company repurchased a total of 94.8974 million shares for a total cost of approximately 35.9 billion HKD in July, August, and September. In the first three quarters of this year, TENCENT has cumulatively repurchased 0.25 billion shares, nearly doubling the volume from the previous year, with a total buyback amount of 88.26 billion HKD, setting a new historical high for the same period.

Since TENCENT has adopted the "cancellation buyback" method (shares bought back are immediately canceled, which helps enhance EPS), the total share capital has continued to decline, with a reduction of 0.33 billion shares from 2021 to now, and total shares have decreased from 9.61 billion shares in 2021 to the current 9.28 billion shares.

TENCENT stated that the repurchased shares have since been canceled, and the aim of the buyback is to enhance shareholder value in the long term.

Editor/rice