Ten­cent’s pub­lish­ing arm reads good po­ten­tial in HK list­ing

China Daily (Hong Kong) - - BUSINESS - By HE WEI in Shang­hai hewei@chi­nadaily.com.cn

Ten­cent Hold­ings Ltd’s online pub­lish­ing arm, China Lit­er­a­ture Ltd, has filed prelist­ing doc­u­ments with bourse oper­a­tor Hong Kong Ex­changes and Clear­ing Lim­ited, for a floata­tion that would raise funds for po­ten­tial ac­qui­si­tions and ex­pand its mo­bile read­ing busi­ness.

The move un­der­pins how Asia’s most val­ued tech firm is us­ing the bur­geon­ing dig­i­tal read­ing busi­ness to cre­ate syn­er­gies with its most prof­itable gam­ing seg­ment, in a bid to grow the com­pany into a fullfledged in­ter­net en­ter­tain­ment con­glom­er­ate, an­a­lysts said.

Ac­cord­ing to a prospec­tus lodged with the Hong Kong bourse late Mon­day, the coun­try’s big­gest e-book com­pany is be­ing spun off from Ten­cent, which cur­rently owns around 65 per­cent of the busi­ness.

Ten­cent said it seeks to re­tain at least 50 per­cent of China Lit­er­a­ture af­ter the spinoff and that the of­fer­ing will con­sist of 15 per­cent of the firm’s en­larged share cap­i­tal. It did not dis­close how much the deal could raise.

The online pub­lish­ing sub­sidiary re­ported net profit of 30.4 mil­lion yuan ($4.47 mil­lion) for the twelve months ended De­cem­ber 2016, af­ter post­ing a net loss of 354.2 mil­lion yuan in the pre­vi­ous year. That was its first profit posted since it be­gan dis­clos­ing fi­nan­cial data in 2014.

China Lit­er­a­ture — like Ama- zon.com Inc’s Kin­dle Store is to the US — is China’s dom­i­nant dig­i­tal read­ing plat­form mea­sured by scale and qual­ity of writ­ers, read­ers and lit­er­a­ture of­fer­ings, ac­cord­ing to con­sul­tancy Frost & Sul­li­van.

The plat­form now counts on its 175.3 mil­lion monthly users, of which over 90 per­cent are mo­bile, to ei­ther pay for pre­mium con­tent pro-

duced by its 5.3 mil­lion writ­ers, or sim­ply sub­scribe to a monthly plan to ac­cess its 8.4 mil­lion lit­er­ary works.

Ten­cent kicked off its online read­ing busi­ness back in 2004, but it only grew ex­po­nen­tially af­ter 2014 when it merged its own pub­lish­ing unit with ri­val Cloudary Corp in a $729.6 mil­lion deal.

Mo­bile QQ , QQ browsers and Ten­cent News are among the key distribution chan­nels for the read­ing unit to reach a broader base of au­di­ences, who are most likely Ten­cent’s gam­ing and so­cial net­work­ing users, ac­cord­ing to iiMe­dia Re­search CEO Zhang Yi.

The IPO doc­u­ments high­light Ten­cent’s am­bi­tions to ex­tend its lead as the coun­try’s con­nois­seur of online lit­er­a­ture, in a list­ing which would also see a stream­lin­ing of its man­age­ment, Zhang noted.

“Given Ten­cent’s siz­able busi­nesses, keep­ing China Lit­er­a­ture as an in­de­pen­dent en­tity is eas­ier for man­age­ment,” he said.

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