To The Moon

🌟🌟🌟Last week Hong Kong stocks are up after China's securities regulators unveiled measures to support Hong Kong 's status as a premier financial hub.

The China Securities Regulatory Commission announced that it would facilitate listings by leading Chinese companies and expand the Stock Connect Scheme. 

The 5 measures include relaxing eligibility criteria for ETFs in the Stock Connect mechanism linking the Hong Kong, Shanghai and Shenzhen markets and loosening listing rules for industry leading Chinese firms wanting to go public in Hong Kong.

Other measures include letting qualified real estate investment trusts (REITs) from the mainland and Hong Kong access the Stock Connect channel and include yuan denominated stock trading counters on the Hong Kong side of the trading mechanism.  A 5th measure optimises mutual recognition arrangement to for funds.

Analysts said that the new policy steps should help widen the investor base, encourage inflows into the Hong Kong market and enhance liquidity. 

$TENCENT(00700)$  $TENCENT(00700)$  $Tencent Holding Ltd.(TCEHY)$  had a great week as it is up 2.6% last Friday and 13% in the past 5 days.  Tencent is world's 2nd largest video game company.  Tencent owns some of the world's most popular games like Honor of Kings and PUBG Mobile.   Apart from hands, Tencent also owns WeChat, QQ, WePay, music streaming, on demand cloud and other businesses.

Tencent's high quality revenue streams from enhancements to its advertising AI model, doubling of  Video Accounts' total user time and games revenue drove Gross Profit Growth of 23% in Financial Year ended December 31 2023.  Total revenue is up 10% to RMB 609 billion (USD 86 billion).

Total Cash was RMB 403.3 billion (USD 56.9 billion) and free cash flow was RMB 34.2 billion (USD 4.8 billion), up 48% year over year. 

Tencent has increased its annual dividend for FY23 by 42% to HKD 3.40 per share and intends to double the size of its share repurchase from HKD 49 billion in 2023 to over HKD 100 billion in 2024.

Tencent is scheduled to report its Q1 24 earnings on May 14 2024.

Performance wise Tencent is up 17% year todate and in 2023, it has risen slightly by 1%.

While games and advertising are Tencent's core revenue drivers, Tencent's investments in Cloud storage, business services, enterprise software also offer long term value creation.  Due to the prevalence of digital adoption and the huge 1.4 billion population in China, Tencent may benefit from recurring revenue through these services. 

Tencent is also an investment powerhouse as it has invested in other businesses over the years.  Once invested, Tencent tends to add value through highlighting the companies on WeChat and other in-house traffic platforms.  This has helped the companies to reduce customer acquisition costs.  This strategy has paid off as external investments have generated an estimated internal rate of  return above 20% for the past 10 years.   

Among the companies that Tencent has invested in are Nio, Snap, $Roblox Corporation(RBLX)$  Nubank, Spotify and Gojek. 

The success of Tencent can be attributed to Founder and CEO Pony Ma who understands the value of forming strategic partnerships to grow Tencent's business. 

Is it time to buy Tencent? 

I believe that Tencent is undervalued and oversold.  At the last closing price of HKD 348.40, Tencent is a great stock to buy and hold long term. 

As Warren Buffett likes to say Buy Wonderful Companies at Fair Price and his favourite holding period is Forever!