Source: Brokerage China Author: Qu Hongyan Recently, China Yangtze Power hit a historical high and once again showed the slow bull stock trend of "tripling in ten years". The slow bull market has left behind many passers-by and brought good returns to the steadfast investors. It is "rare for those who triple in one year to be like carp jumping over the dragon gate, while those who double in three years are few and far between." On the other end of the investment world, however, violent collapses are also deafening, with many financial products suspected of "Ponzi schemes" ceasing payments, leaving investors with no hope of recovering their investments. Both positive and negative cases illustrate the importance of forming a suitable mentality towards money in one's lifetime; otherwise, sooner or later, you will divorce yourself from your money. "I call this the money mind, a person's IQ can reach 120, 140, or even higher levels, and perhaps some people's minds are good at doing one thing, while others are good at doing another. They can do things that most ordinary people can't do. But I know some very smart people who make very foolish decisions because they lack the money mind." Buffett once said so. The so-called money mind refers to believing in common sense, believing in compound interest, being cautious and rational, thinking independently, prioritizing security over return, not dealing with people with questionable character, not easily guaranteeing for others, not believing in windfall profits, and not trying to cross legal norms for extra benefits. In today's world of ubiquitous information, everyone's wealth may become the "prey" of those with ulterior motives. Only with the money mind, can one form good behavior habits and shield oneself from separating from one's wealth. Do not entrust your wealth easily. Wealth is easy to lose but hard to accumulate, and trust is a vital reason leading to the rapid loss of wealth. "Do not allow anyone else to manage your business unless you can watch their every move closely and understand their behavior; or you have strong reasons to believe in their character and ability. For investors, this criterion determines when you can let someone else make investment decisions for you." Graham's criterion written eighty years ago is so clear. Almost all the investors who lost their wealth in the financial products have violated the above two criteria. They did not have the ability to closely supervise the whereabouts of their funds, nor did they have sufficient reasons to believe in the character of the product issuers. They easily invested their own wealth solely based on others' glib tongue and a piece of commitment paper. They did not act as gatekeepers of their own wealth and ended up with nothing left even if the government punished the wrongdoers. "An ounce of prevention is worth a pound of cure." This is a phrase Munger often says. Destiny must be in one's own hands, and investors with a suitable money mind will try their best to find suspicious points in their investments to protect the safety of their principal. For example, whether the manager is trustworthy, whether the underlying assets are profitable, whether oneself can timely monitor the risks in the investment process, and whether the sales staff is obtaining large commissions. As long as any unreliable signs are found, these investors firmly will not invest their money. Do not desire to get rich quick. As in the capital market and anywhere else, making money is not easy, and desiring to get rich quick will lead to quick loss of wealth. In the capital market, the desire to get rich quickly often leads to investors over-allocating specific stocks, industries, or assets at the worst time. For example, buying high-risk stocks that can gain huge returns once an adventure succeeds, but the chance of success is very small, also known as "whispering stocks" by legendary fund manager Peter Lynch. "They often tell investors a story with explosive effects. These 'whispering stocks' have a hypnotic effect on people, and it is easy for you to believe that the story the company tells has an emotional appeal that can easily confuse you." This is like hearing a very tempting "sizzling" sound, making you salivate, but you did not notice that there is no steak on the grill. In the eyes of investors who lack the money mind, stable yield provided by blue chips such as China Yangtze Power cannot meet their demands. However, historical experience clearly shows that buying stocks lacking in safety solely based on imagined high yields is unwise. The long-term average investment return of general stocks is 9%-10%, which is also the average investment return of stock indexes in history, a benchmark to measure one's investment performance and the benchmark to measure fund investment performance.
Author: Hu Feijun

Tencent's latest buyback "bill" for the year 2024 has been released.

On January 3, reporters from Brokerage China learned that $TENCENT (00700.HK)$ the commitment of a 100 billion repurchase plan at the beginning of 2024 was successfully completed. Public information from the Hong Kong Stock Exchange shows that by December 31, 2024, TENCENT repurchased a total of 0.307 billion shares, with a total amount reaching 112 billion Hong Kong dollars.

It is understood that TENCENT's repurchase completely offset the impact of its major shareholder's Shareholding sale. Information shows that since the major shareholder Prosus started selling TENCENT shares in June 2022, the total repurchase amount of TENCENT had reached 187.6 billion Hong Kong dollars by December 27, 2024, surpassing the Shareholding sale amount of Prosus of 174.5 billion Hong Kong dollars during the same period.

It is worth mentioning that the total repurchase amount in the Hong Kong stock market in 2024 also set a historical record. According to Wind data, the total amount of stock repurchases in the Hong Kong stock market reached 265.7 billion Hong Kong dollars in 2024, a year-on-year increase of 109%. A total of 281 Hong Kong listed companies carried out repurchases in 2024, among which TENCENT's repurchase amount accounted for 42%, leading the scale of shareholder returns in the Hong Kong stock market.

Driven by continuous "cancellation-style repurchase," TENCENT's total share capital has further decreased to 9.22 billion, reaching the lowest level in ten years, while its EPS has continued to rise, with growth exceeding that of revenue and operating profit.

Fulfill the repurchase commitment of over 100 billion.

In March 2024, TENCENT announced in its 2023 annual report the plan to at least double the scale of TENCENT's share repurchase from 49.4 billion HKD in 2023 to over 100 billion HKD in 2024.

In terms of execution, TENCENT's repurchase amounts in each quarter of 2024 reached 14.835 billion HKD, 37.515 billion HKD, 35.913 billion HKD, and 23.739 billion HKD, totaling 112 billion HKD, with 129 transactions made throughout the year, averaging a daily repurchase amount of 0.868 billion HKD.

Entering the fourth quarter of 2024, TENCENT continued to repurchase shares even at the high stock price in early October. On October 7, 2024, TENCENT's stock price broke 482 HKD, setting an annual high, with the repurchase amount still exceeding 0.5 billion HKD that day.

Data shows that TENCENT's share repurchase amounts in 2021, 2022, and 2023 were 2.6 billion HKD, 33.8 billion HKD, and 49.4 billion HKD respectively. This also means that TENCENT's repurchase amount in 2024 will reach 112 billion HKD, setting a historical high for the company's annual repurchase amount.

Relevant industry insiders analyzed that continuing to repurchase shares at high annual stock prices reflects TENCENT's strong commitment to the repurchase plan, and also demonstrates TENCENT's long-term confidence in its own Business development.

It is understood that in the past year, TENCENT's growth momentum has been robust, driven by several "new sprouts" in Business such as Video Accounts, Mini Programs, AI big models, and Saas, while some evergreen games have also "revitalized," achieving high-quality growth and jointly promoting the growth of gross profit.

The third quarter report for 2024 shows that TENCENT achieved revenue of 167.193 billion yuan, with gross profit and operating profit (Non-IFRS) at 88.828 billion yuan and 61.274 billion yuan respectively, year-on-year growth of 16% and 19%, surpassing the revenue growth rate for eight consecutive quarters, continuing a high-quality development trend.

Meanwhile, the company's ample cash flow has also given TENCENT the confidence to continue 'buying itself,' providing a solid financial foundation for implementing shareholder returns. The Earnings Reports show that from the first to the third quarter of 2024, TENCENT's quarterly free cash flow reached 51.9 billion yuan, 40.4 billion yuan, and 58.5 billion yuan respectively. As of September 30, 2024, TENCENT's ending balance of cash and cash equivalents reached 145.468 billion yuan.

Ease the pressure from the significant Shareholding reduction.

According to reporters from the Brokerage in China, while fulfilling the repurchase plan, TENCENT has actively chosen to cancel all repurchased shares. The large-scale 'cancellation-type repurchase' has significantly reduced TENCENT's total share capital, directly increasing EPS and enhancing shareholder returns.

As of December 31, 2024, TENCENT's total share capital is 9.22 billion shares, a decrease of 0.26 billion shares compared to the beginning of 2024. From the end of 2021 to the present, TENCENT's total share capital has decreased by approximately 0.38 billion shares over three years, reaching the lowest level in a decade.

According to industry analysts, under the premise that the company's total profit has not changed, a decrease in share capital will directly enhance EPS. Huachuang Securities pointed out in the Research Reports that TENCENT's large-scale repurchase is expected to enable the growth rate of EPS to continue to outpace the growth rate of profits, and at this stage, TENCENT still has multiple high-growth new Business drivers, making the growth model of EPS growth > Net income growth > gross profit growth > revenue growth likely to become a new paradigm.

Based on the Non-IFRS net income calculation for the third quarter of 2024, TENCENT's EPS for the quarter reached 6.475 yuan, a year-on-year increase of 36%, significantly exceeding the growth rate of operating profit during the same period.

In recent years, TENCENT has also continuously increased its dividend distribution. In 2020 and 2021, TENCENT paid a dividend of 1.6 Hong Kong dollars per share at the end of both years, which increased to 2.4 Hong Kong dollars in 2022 and further increased to 3.4 Hong Kong dollars in 2023. The mid-year report for 2024 shows that TENCENT has distributed a final dividend of 3.4 Hong Kong dollars per share for the year ending December 31, 2023 (totaling about 31.7 billion Hong Kong dollars), a year-on-year increase of approximately 39%.

With a series of positive shareholder return initiatives from TENCENT, the influence of major shareholder Prosus in the secondary market has significantly diminished.

According to data, since June 2022, TENCENT's major shareholder Prosus has launched an open repurchase plan due to its stock price being significantly below its net assets, raising funds by selling TENCENT shares to buy back its own stock. According to public information, as of December 27, 2024, Prosus has cumulatively sold TENCENT shares for 174.5 billion HKD, while the total repurchase amount by TENCENT during the same period reached 187.6 billion HKD, exceeding the amount sold by the major shareholder.

It is reported that this is mainly because TENCENT significantly increased its repurchase efforts in the fiscal year 2024, with a total repurchase of 112 billion HKD, while the amount sold by the major shareholder as of December 27, 2024, was only 54.2 billion HKD, which is only half of TENCENT's repurchase amount.

This round of repurchases by TENCENT has injected a strong boost into the Hong Kong stock market and has sparked a wave of shareholder returns in the market.

Wind data shows that as of December 31, 2024, 281 Hong Kong stocks have been repurchased, with a cumulative repurchase amount reaching 265.7 billion HKD, setting a new annual high. Among them, TENCENT contributed over 40% of the total repurchase amount in the Hong Kong stock market with 112 billion HKD, while other Internet Technology companies like Meituan and Kuaishou also ranked high, becoming the main force in repurchases. $HSBC HOLDINGS (00005.HK)$ 、$AIA (01299.HK)$Waiting financial companies are ranked among the top five in the repurchase list.

Editor/Rocky