Strong long-term growth potential - $TENCENT(00700)$
Tencent has 1.27bn monthly active users (MAU) on WeChat, covering c.90% of China's population. This represents strong long-term growth potential by ramping up monetisation on its Video Accounts and mini programmes, as well as other social segments, where a large user base is the key value proposition.
Tencent also has a strong game portfolio, which includes top-ranked games like Honor of Kings and Peacekeeper Elite. Tencent has the capability to consistently launch blockbuster games, and is accelerating its overseas expansion and gaining market share.
Tencent Cloud is the second-largest player in China's cloud service market. Its Fintech revenue is expected to grow at c.14% CAGR during FY21-24, by leveraging on its experience in the consumer market to expand into the enterprise market. Besides, the business will continue to benefit from the higher payment frequency of WePay alongside wider usage.
Despite its strong long-term growth potential and bullish longer term outlook, there are also possible downside risks that could bring negative impact to the company. These include:-
(1) Regulatory tightening on games approval process and anti-trust related market practices;
(2) Irrational market competition on social media segments; and
(3) Execution on WeChat monetisation
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