Wednesday, March 20, 2019
Martin Hennecke

Game on as Tencent profit hits $29b
Tencent Holdings (0700) yesterday posted a quarterly profit that exceeded estimates, bolstered by mobile game blockbusters like PlayerUnknown's Battlegrounds, as users on China's most popular social network surpassed a billion for the first time. Tencent posted a 61 percent jump in net income to 23.3 billion yuan (HK$28.7 billion) in the three months ended March, outstripping the 17.4 billion-yuan average projection. That was buoyed by a one-time gain of almost 7.6 billion yuan as the value of investments in arenas from video streaming to news content rose. China's largest social network and gaming company defied fears that outsized spending would hammer margins. The owner of the giant WeChat messaging platform opened its wallet to sustain growth as PC gaming slows, investing in cloud computing, entertainment and physical retail to lock horns with Alibaba Group Holding. Revenue rose 48 percent to 73.5 billion yuan, which strips out one-time items, came to 1.92 yuan, missing the 1.94 yuan average estimate. Shares of Tencent fluctuated wildly yesterday before earnings were announced. The stock has fallen 2.4 percent this year. Revenue from Value Added Services, which includes online games and messaging, rose 34 percent to 46.9 billion yuan. Honour of Kings continues to be a core source of earnings. Developed by Tencent's own studio, the mobile title resembles the world's most popular desktop title League of Legends, whose developer was acquired by Tencent in 2015. Anchored by its marquee title, the smartphone games business yielded 68 percent growth in the quarter. But overall costs surged 51 percent. Tencent executives have signaled a willingness to sacrifice margins in favor of longer term growth in new businesses, though that would depend on growing and engaging a massive user base now primarily confined to China. Meanwhile, the internet giant is collaborating with local medical group Union Medical Healthcare (2138) to establish a number of clinics and to introduce Tencent Doctorwork's closed-loop system for intelligent clinics in the city. Tencent Doctorwork is a digital health service enterprise that develops both the conventional medical care business at brick-and-mortar clinics and the online medical care on the internet.

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