Tencent Holdings, in which South African technology and media giant Naspers holds an approximately one-third stake, posted a 43% rise in third-quarter profit as its ability to attract Chinese gamers and social media mavens fuelled advertising growth.
Net income climbed to 10,6bn yuan (US$1,5bn) in the three months ended September, the Shenzhen-based company said on Wednesday. That compares with the 10,7bn yuan average of analysts’ estimates compiled by Bloomberg. Adjusted earnings per share were 1,24 yuan, compared with the 1,26 yuan average of estimates.
Tencent’s bottom line depends on its effectiveness in engaging a Chinese Internet population now 710m strong, and advertising has become a major source of sales growth.
The operator of messaging apps WeChat and QQ increased ad space and attracted big brands to a video-streaming service where users spend hundreds of millions of hours monthly. It’s also been scooping up popular content and fleshing out its mobile games slate, adding hits like King Glory and Legacy TLBB while acquiring Clash of Clans studio Supercell.
“We see brand advertisement enjoying stable growth due to the expansion of Tencent’s video business,” Wen Tianli, an analyst at Blue Lotus Capital Advisors, wrote before the earnings. “The decline of PC games has been offset by the increasing number of players of mobile games on their summer vacation.”
Sales rose 52% to 40,4bn yuan, compared with estimates for 39bn yuan.
Tencent has helped brands including BMW run promotions via WeChat Moments, a service similar to Facebook’s news feed where users browse photos, videos and stories posted by friends.
It’s also buying the rights to anime, comics and novels to convert into movies and mobile games. In the Chinese games market alone, revenue could climb 43% to $12,8bn by 2020 from last year, according to PricewaterhouseCoopers.
Shares of Tencent rose 1,9% to HK$196,90 in Hong Kong before earnings were announced. The stock has gained 29% this year, compared with a 12% rise for New York-listed Alibaba.
Naspers was trading more than 3% higher in Johannesburg at 11.34am on Wednesday. — (c) 2016 Bloomberg LP
