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Profit rise for Tencent

Mar 16 2011 14:25 Reuters

Company Data

NASPERS LIMITED [JSE:NPN]

Last traded 0
Change 51,68
% Change 0
Cumulative volume 1256588
Market cap 617.84bn

Last Updated: 21-11-2014 at 04:28. Prices are delayed by 15 minutes. Source: McGregor BFA

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Shanghai - Tencent Holdings , China's most valuable internet company, said it plans to invest heavily in social networking, e-commerce and search, after posting a 46% rise in quarterly profit.

The profit growth was the slowest in more than three years as the company is facing stiff competition in China's red hot online gaming sector.

Tencent, which operates hit computer games such as Dungeon & Fighter and Cross Fire, said it will also ramp up investment in microblogging services and online security.

"I definitely think they are feeling the competition," said Paul Wuh, a Hong Kong-based analyst with Samsung Securities.

Wuh said Tencent's push to boost its Twitter-like microblog service was in response to Sina Corp's popular Weibo. Tencent said its microblog has over 110 million registered users.

"I think they are doing all the right things to move into these areas and given the strength of their platform, it looks like it makes sense," Wuh said.

Tencent, more than 30% owned by Africa's biggest media group Naspers [JSE:NPN], runs China's largest instant messaging platform QQ and social networking site QZone.

Tencent has been diversifying its business. In February, it entered into a joint venture with daily deals website Groupon to launch a group-buying website in China.

The firm also bought a majority stake in US game developer Riot Games.

Tencent said it will make investments to boost its search engine and online advertising platform and improve its e-commerce sites Paipai and Tenpay.

"In view of the opportunities and challenges, we have initiated a new investment phase, during which we will be making significant investments in our existing platforms including IM, SNS (social-networking sites), wireless and gaming," the company said.

Chinese internet firms have begun to venture out of their niche areas to diversify and grow.

Baidu, China's largest search engine, ventured into online video and e-commerce through an investment in online video website Qiyi.com and a tie-up with Japanese mall operator Rakuten .

Alibaba Group also invested into Sogou, Sohu's search engine.

Games still strong

Tencent said it expects better demand for its games in the first quarter on the back of school and Chinese New Year holidays.

Tencent and rivals Shanda Games and NetEase.com have been riding high on the growth in the world's largest internet and mobile markets, as China's youth throng cyber cafes to play games, chat and hook up to social networks.

However, signs are emerging that the market is maturing as gamers get pickier and online game companies adopt longer production cycles to refine games.

Tencent's fourth-quarter net profit rose to 2.2 billion yuan from 1.51 billion yuan a year earlier. The profit was in line with the forecast of analysts polled by Thomson Reuters I/B/E/S.

Revenue rose 50% to 5.52 billion yuan with internet value-added services, including online gaming and chat messaging services, contributing 79.4%. Analysts had forecast 5.41 billion yuan.

Internet value-added services, which include online games, rose 54%. The increase was attributed to a full-quarter contribution of Tencent's new webgame Qi Xiong Zheng Ba, which analysts said has gained traction with users.

Tencent's mobile value-added services rose 32.5% to 728.5 million yuan.

China's online games market rose 25% in the fourth quarter last year to hit 9 billion yuan ($1.4 billion) with Tencent holding 31% of the market, data from Beijing-based research firm iResearch showed.

Tencent shares have risen about 30% this year, outperforming a mostly flat broader Hong Kong market.

They closed up 1.31% ahead of the earnings report.
naspers  |  tencent  |  baidu
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