Ten­cent’s shares gain on ac­qui­si­tions

China’s biggestWeb group spends big time to cre­ate dig­i­tal ser­vice ecosys­tem “one stop shop”


The game based on the re­al­ity TV star’s life just can’t keep up.

App de­vel­oper Glu Mo­bile Inc, which cre­ated the “Kim Kar­dashian: Hol­ly­wood” role­play­ing mo­bile game in 2014, has fallen the most out of 11 known listed in­vest­ments tab­u­lated by Bloomberg.

Its share price has dropped al­most 60 per­cent since Ten­cent Hold­ing Ltd’s $126 mil­lion in­vest­ment 16 months ago and 3.7 per­cent year-to­date.

Six of the 11 com­pa­nies sur­veyed have fallen since Ten­cent’s in­vest­ments be­tween 2011 and June this year. Ten­cent has at least a five per­cent stake in each of them. China’s big­gest in­ter­net com­pany has been in­vest­ing ag­gres­sively in add-ons from maps to mo­bile games to com­ple­ment its WeChat and QQ so­cial net­work ser­vices. Its strat­egy seems to be pay­ing off for now — ear­lier this month, its sec­ond-quar­ter sales and net in­come beat an­a­lysts’ es­ti­mates, and the shares rose to a newrecord.

It’s quite ob­vi­ous that Ten­cent is try­ing to “build an ecosys­tem for their dig­i­tal ser­vice, to be­come a one-stop shop,” said Sandy Shen, a Gart­ner Inc re­search di­rec­tor. “They’ve in­vested in maps and nav­i­ga­tion com­pa­nies, gam­ing, me­dia con­tent, user re­views, guides. They are try­ing to be present in ev­ery as­pect of life a con­sumer would need ser­vices for.”

On av­er­age, com­pa­nies in the soft­ware and gam­ing sec­tors have risen since the in­vest­ment. Chi­nese soft­ware maker King­soft Corp Ltd has soared 210 per­cent since Ten­cent’s $115 mil­lion in­vest­ment in July 2011. Game pub­lish­ers Ac­tivi­sion Bl­iz­zard Inc and Para­dox In­ter­ac­tive AB have risen 135 per­cent and 83 per­cent since July 2013 and May this year re­spec­tively. Michelle Ma,

Ten­cent’s mo­bile gam­ing rev­enue dou­bled to 9.6 bil­lion yuan in its sec­ond-quar­ter. This out­paced a 52 per­cent rise in over­all rev­enue to 35.7 bil­lion yuan ($5.4 bil­lion), and makes the com­pany one of the big­gest gam­ing providers in the world. Its gam­ing in­vest­ments can ben­e­fit from leveraging its “huge” user base and uti­liz­ing its elec­tronic pay­ment sys­tem, Shen said, re­fer­ring to TenPay.

Ten­cent’s e-com­merce in­vest­ments, which in­clude JD.com Inc, Le­juHold­ings Ltd and 58.com Inc, have on av­er­age fallen in the past fewyears. Le­juand58.comhave­dropped about 56 per­cent and 16 per­cent since March and June 2014 re­spec­tively. JD.com re­mains the bright spot in e-com­merce; it has risen about 36 per­cent since Ten­cent’s $214.7 mil­lion pur­chase of 15 per­cent stake in­March 2014.

“There are usu­ally mul­ti­ple fac­tors af­fect­ing share prices,” Bloomberg In­tel­li­gence an­a­lyst Michelle Ma said in a phone in­ter­view. “From Ten­cent’s per­spec­tive, they’re look­ing for own­er­ship and long-term strate­gic hold­ings; they may not mind the fluc­tu­a­tion of the share per­for­mance.”

Ten­cent held mi­nor­ity stakes of be­tween 5-23 per­cent in each of the 11 com­pa­nies sur­veyed, in­clud­ing 5.023 per­cent in Ac­tivi­sion Bl­iz­zard as of June 13, 21.5 per­cent in Glu Mo­bile as of Fe­bru­ary 23 and raised its stake in JD.com to 21.25 per­cent this month.

They “pre­fer mi­nor­ity in­vest­ments as they choose to let the man­age­ment of the in­vestees run the com­pany in­stead of try­ing to in­te­grate them,” Jia­long Shi, an an­a­lyst at No­mura Hold­ings Inc said in an e-mail. “They are quite flex­i­ble in terms of the stake to be ac­quired.”

The com­pany, which is Asia’s largest in­ter­net com­pany by mar­ket value, also an­nounced it would lead an $8.6 bil­lion ac­qui­si­tion of game maker Su­per­cell Oy in June this year.

From Ten­cent’s per­spec­tive, they’re look­ing for own­er­ship and long-term strate­gic hold­ings.” Bloomberg In­tel­li­gence an­a­lyst

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