To The Moon

 TMTPost --  Tencent Holdings Limited vows to double down repurchase as China’s leading social media and video game company accelerates growth both top and bottom line.

Credit：Tencent

Tencent has bought back HK$14.8 billion in the quarter ended March 2024, hitting the quarterly repurchase record. The company has said in March that it intended to at at least double the size of its share repurchases to more than HK$100 billion in the year 2024, from around HK$49 billion in 2023. It reiterated the buyback target following financial results of the March quarter. "Executing on our commitment to return excess capital to shareholders, we stepped up our buyback plan, and are on track to repurchase over HK$100 billion of our shares in 2024, as well as paying an increased dividend, while investing in AI technology, platform enhancements and high production value content,” said Tencent chairman and CEO Pony Ma, or Ma Huateng.

Tencent posted revenue of RMB159.5 billion (US$22.5 billion) in the first quarter of the year, beating Wall Street expectation of RMB158.81 billion. The revenue represented a 6% year-over-year (YoY) rise, compared with growth of 6% in the previous quarter that still fell short of estimates. On an IFRS basis, adjusted net income soared 54% YoY to RMB50.27 billion, and net income attributable to equity holders rose 62% YoY to RMB41.9 billion, both better than analysts’ estimated RMB43 billion and RMB34.5 billion, respectively. Opearting profit was RMB52.6 billion, up 38% YoY, much higher than analysts’ forecast of RMB45.28 billion.

Gross profit in the first quarter was RMB83.9 billion with a 23% YoY increase, outpacing the revenue for the sixth straight quarter. Gross margin that quarter expanded to 53% from 45% a year earlier, higher than margin of 50% in the previous quarter. Tencent attributed accleration of gross margin to rapid growth of high-quality income sources, including advertising revenue from Video Accounts and Weixin Search, Mini Games platform service fees, wealth management revenue and eCmmerce technical service fees. The improvement in  cost-effectiveness of long-form video and cloud business also contributed to gross profit growth.

Stellar growth of advertising offset decline in games.  Revenue from online advertising were RMB26.5 billion , up 26% YoY, fueled by Video Accounts, Mini Programs, Official Accounts and Weixin Search, due to increased engagement and ongoing enhancement of artificial intelligence (AI)-powered advertising infrastructure. Tencent said it upgraded our advertising technology platform to help advertisers establish advertising campaigns more effectively, and made generative AI-powered advertising creation tools available to all advertisers.Video Accounts’ total user time spent increased over 80% YoY, and Mini Programs’ grew over 20%. Tencent said it strengthened Video Accounts’ live streaming eCommerce ecosystem by diversifying merchandise categories and enabling more content creators to monetize through eCommerce activities. Daily activations for non-game Mini Programs grew at a double-digit rate year-on-year while gross receipts for Mini Games grew 30% YoY.

Tencent’s bread-and-butter VAS (value-added services) including game and social network business, generated RMB78.6 billion, falling 0.9% YoY. International Games gross receipts gained 34% YoY r, due to resurgent popularity for Supercell’s games, in particular Brawl Stars, and user and gross receipts growth from PUBG Mobile. International games revenue edged up lesser 3% YoY to RMB13.6 billion due to the lengthy revenue deferral cycle for Supercell’s games. Domestic Games gross receipts returned to growth with a 3% YoY increase but revenues from the games dropped 2% YoY to RMB34.5 billion due to revenue deferral.  Revenue from Honour of Kings declined YoY against a high base from the Chinese New Year period last year, and decline in revenue from Peacekeeper Elite was owing to weak monetisable content in the second half of 2023. These declines were largely offset by contributions from recently launched games, including Valorant and Lost Ark, alongside robust growth from Fight of the Golden Spatula. Tencenct said several of its leading games in at home and abroad started to benefit from team reorganizations and created a foundation for games revenue to resume growth in future quarters.

Revenues from FinTech and Business Services increased 7% YoY to RMB52.3 billion in the first quarter. FinTech Services revenues grew at a single-digit rate, primarily due to moderated growth in offline consumption spending and a decrease in withdrawal fee revenue, while wealth management servicesrevenues experienced robust growth. Business Services achieved a teens year-on-year revenue growth rate, driven by higher cloud services revenues and increased eCommerce technology service fees within Video Accounts. Tencent president Martin Lau said the headwind of sluggish economy in China will turn as the government is putting a lot of stimulus to revive economy as well as consumption confidence.