Tencent’s gaming stutters in social media forums
TENCENT Holdings reported thirdquarter profit that missed analyst estimates after the Chinese internet company’s revenue gained at the slowest pace since 2007 and development and staff costs increased.
Net income rose 46 percent to 5.66 billion yuan (R10.32bn), the Hong Kong-listed company said yesterday. Profit trailed the 6.1 billion-yuan average of 10 analysts’ estimates compiled by Bloomberg.
Tencent is seeking to capture the consumer shift to mobile devices as it adds new games and offerings to its WeChat and QQ messaging services to draw revenue from the free application’s users. Mobile-gaming income dropped to 2.6 billion yuan in the third quarter from 3 billion yuan in the previous three months as the Shenzhen-based company shifted focus to improve the quality of the games.
“Revenue growth wasn’t as high as people were expecting,” said analyst Li Muzhi. “Also, administrative costs for hiring have gone up.”
Tencent shares rose 0.2 percent to HK$129.50 (R187.23) at the close of trade in Hong Kong, after earlier dropping as much as 3.5 percent.
Revenue rose 28 percent, the slowest quarterly pace in more than seven years, to 19.8 billion yuan, partly due to the sale of its e-commerce business.
Revenue from China’s online gaming market is projected to expand to 225 billion yuan by 2017, from an estimated 115 billion yuan this year, according to IResearch, an internet consultant company.
“At the current price, 80 percent of Tencent’s value is predicated on economic profit that it has yet to earn,” said analyst Andrew Zamfotis. “We just would prefer it to be a little cheaper given how much outperformance there has been over the past two years.”
Tencent’s 28 percent revenue growth compares with an average of 55 percent growth between the second quarter of 2007 and last quarter, according to Bloomberg data. – Bloomberg
Tencent Holdings’ messaging services QQ and WeChat’s results have slowed down.