Tencent shares rise after Q1 profit beats

Ruben Ruiz
May 17, 2018

There's an argument to be made for stripping out extraneous items because Tencent runs the games and social side of the business itself, but doesn't have direct control over investees. In the following months, however, the company's shares came under pressure with increasing costs driving investor fear of lower margins.

Honour of Kings, which itself debuted in China in 2015, topped China's iOS Top Grossing Chart, Tencent noted in a release, and saw "double-digit growth" in daily active users along with "strong growth" in year-over-year revenues. Profit was up 61% over the same period one year ago.

Tencent still looks to expand its PC game presence in the future, however, partially through releasing a version of the battle royale PlayerUnknown's Battlegrounds in China, a game that is now pending government approval. The first is called "PlayerUnknown's Battlegrounds" or PUBG, which is a massive multiplayer online game. The company secured the rights to distribute both "battle royale" games in China and beyond and said it is just beginning to monetize them.

Tencent's PC games reported flat revenue of 14.1 billion yuan. Earlier this month it led a US$820 million round of funding in Shenzhen-based UBTECH Robotics, making it the world's most valuable AI start-up with an estimated valuation of US$5 billion. Now not available in China, it is scheduled to be launched there during the next couple of months.

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Stripping out interest and others, core operating margin slipped below 30 percent from 31 percent a year prior. Fortnite has been developed by video game developer Epic Games who Tencent has a stake in - the game is now unavailable in China, but there are plans to launch the game in the region in the coming months. Since late March, the shares have seen a sharp reversal, losing about $87 billion in value to leave Tencent with a market capitalisation of about $480 billion.

Other earnings drivers for Tencent included a video subscription service that is similar to that of Netflix.

Due to the fact that social media services such as Facebook, Twitter, Instagram and Snapchat are inaccessible in China, there exists a whole ecosystem of social networking and messaging platforms that are immensely popular in and around China but hardly known anywhere else in the world. While WeChat has just passed the billion-user mark and is trailing the world's largest social network by more than a billion users, the company's financial results are almost on par with Facebook's.

Other reports by GizPress

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