Ten­cent’s gaming stut­ters in so­cial me­dia fo­rums

The Star Early Edition - - INTERNATIONAL - Lulu Yilun Chen

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

PHOTO: BLOOMBERG

Ten­cent Hold­ings’ mes­sag­ing ser­vices QQ and WeChat’s re­sults have slowed down.

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