Fitch has kept Tencent's (HKG:0700) long-term foreign- and local-currency issuer default ratings and senior unsecured ratings at 'A' along with a stable outlook, as it expects the company's business operations and finances to be robust even with heavy capital spending on AI, according to a Wednesday press release.
The ratings firm said the Chinese conglomerate's strategy to balance shareholder returns and AI growth investments will support modest gross leverage and a sustainable cash balance.
However, the company's ratings remain constrained by the Chinese sovereign rating, due to Tencent's mostly domestic operations and its exposure to government regulation and intervention in China's internet sector, Fitch said.
Fitch expects Tencent's EBITDA gross leverage to remain modest at 1.4x-1.5xwith a net cash position over the next few years, supported by expanding EBITDA and positive FCF, as it prioritizes AI-related deals, while having the option to sell non-core assets, and cuts share buybacks further during its intensive investment period.
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