Tencent Fourth-quarter Net Profit Rose 47 Percent

By Jia Yizhen

HONG KONG , Mar. 23, 2017

Tencent Holdings Ltd, China’s leading company of Internet value added services, said Wednesday fourth-quarter net profit increased 47 percent from a year earlier, mainly driven by online games and performance-based advertising. Its cloud service also surged in 2016.

Net profit for the three months ended December 31 rose 47 percent to RMB10,529 million, from RMB7,164 million in the year-earlier period, which was lower than RMB11,750 million average of six estimates from analysts in a Thomson Reuters poll. The revenues were RMB43,864 million, with an increase of 44 percent over the fourth quarter of 2015, due to large growth of smart phone games and performance-based advertising. The former represented 51 percent year on year revenue growth, while the latter rose 77 percent from a year earlier to RMB5,168 million, mainly from Weixin Moments, mobile news apps, and Weixin Official Accounts. Full-year net profit was RMB41,095 million, up 43 per cent, while revenue rose 48 percent to RMB151,938 million.

Tencent became the first Chinese brand to top the $100 billion mark, according to a ranking of the most valuable brands in the country. It was valued at $106.2 billion, almost doubled the value of e-commerce giant Alibaba, its biggest rival. Tencent sustained its dominance in mobile gaming and social media apps. Its most popular messaging app Wechat boasted 889 million active users last year. It also expanded cloud service whose revenue more than tripled year on year in 2016, the company said.

Core Pacific Yamaichi analyst Kevin Tam told Reuters that Tencent’s games and advertising business would maintain decent growth while emerging payment and cloud business offered investors new interest.

However, Tencent’s annual net margin narrowed from 28 percent to 27 percent and capital expenditures rose to RMB 12,100 million, up 57 percent from 2015.

“Mobile gaming is developing rapidly in China as well as globally, therefore we are focusing and going to increase investment and attach great importance to the ecosystem of games,” Pony Ma, Tencent’s chairman and chief executive said in a press conference. “For cloud business, we are also in early stage investment so the cost may remain high in the near term,” he added.

After five days of gains, Tencent’s share prices closed down 1.6 percent in Hong Kong on Wednesday and continuously dropped 0.98 percent today.

 

-An Assignment of Global Financial Journalism

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