Tencent Holdings posted a quarterly profit that surpassed all estimates as its marquee title Honour of Kings drove a 54% surge in mobile gaming revenue.
China’s largest corporation reported a 70% surge in net income to a record 18.2bn yuan (US$2.7bn) for the three months ended June, exceeding the 13.5bn yuan average of estimates compiled by Bloomberg. Sales rose 59% to 56.6bn yuan, also topping projections.
Tencent’s market valuation is near record highs, fuelled by expectations it’ll continue to tap the spending power of 200m gamers on Honour of Kings and deliver more hits.
The title’s popularity helped sales from smartphone play overtake desktops for the first time.
The still-nascent advertising and finance business on instant messaging app WeChat has also boosted investors’ confidence it can compete with ad-leader Alibaba Group and sustain growth.
“Mobile games revenue grew fast, benefiting from titles like Honour of Kings,” said Li Yujie, an analyst with RHB Research Institute in Hong Kong. “Advertising business also topped our expectations and grew at a healthy speed.”
Shares of Tencent rose 1.4% on Wednesday and have gained 70% this year, compared to an 80% rise for New York-listed Alibaba. Shares in South Africa’s Naspers, which owns 33.2% of Tencent, were trading 3.5% higher at R2 904.20 at 12.15pm in Johannesburg. That’s near their record high of R2 939.97.
Tencent’s revenue from value-added services, which includes online games and messaging, climbed 43% to 36.8bn yuan. Online advertising sales rose 55% to 10.1bn yuan. WeChat had 963m monthly active users, up 19.5% from the previous year. But the mobile version of QQ, Tencent’s other mainstay social network, had 3.9% fewer users at the end of the quarter.
“Tencent’s existing games and pipeline continue to draw new gamers and revenue,” Morgan Stanley analysts led by Hong Kong-based Grace Chen wrote in a report ahead of the results release. They also foresee “strong growth potential in performance advertising and surging revenue growth in the payments business”. — Reported by Lulu Yilun Chen, (c) 2017 Bloomberg LP
