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Tencent books record first-quarter profit

Tencent books record first-quarter profit

HONG KONG, May 18: Tencent Holdings Ltd posted record quarterly profit on Wednesday, smashing market expectations, as the social media and gaming giant booked a rise in the value of its investments while fintech and cloud computing make up for declines in games, reports Reuters. Even so, revenue grew at its slowest-ever rate as heightened regulatory scrutiny hobbled its gaming operations, allowing earnings from financial technology (fintech) and other business services to eclipse smartphone games for the first time. China’s gaming regulator has spent the year so far working through a backlog of applications to monetize titles, having suspended approvals for most of last year. The impact on Tencent was the sharpest-ever profit drop in the three months through December, and the slowest annual profit growth in 13 years. Approvals restarted in December, with Tencent receiving permission to launch major title Perfect World Mobile in the January-March quarter. In those three months, Tencent booked 17 per cent growth in net profit at 27 billion yuan ($3.93 billion). That compared with the 19.4 billion yuan average of 13 analyst estimates compiled by Refinitiv. Boosting profit was 46 per cent in gains such as from investments to 11.1 billion yuan, while marketing costs dropped 24 per cent. Tencent’s portfolio companies include Tencent Music Entertainment Group and game live streaming platform Huya Inc. Revenue, however, came in just shy of analyst estimates at 85.5 billion yuan, with growth at an all-time low of 16 per cent. “FinTech and Business Services”, a category disclosed for the first time and which includes payment and cloud services, generated 21.8 billion yuan in the quarter, up 44 percent. That was more than smartphone gaming revenue, traditionally Tencent’s largest single revenue generator, which fell 2 per cent to 21.2 billion yuan due to fewer new titles. Tencent waited in vain for over a year for approval to earn money via in-app purchases on its popular game PUBG Mobile. It pulled the game last week and launched approved title “Peacekeeper Elite”, also known as Game for Peace, a tactical tournament game similar to PUBG but with a socialist makeover. The firm on Wednesday said it will release several games in the second quarter of 2019 and is “in the early stages of experimenting” with season passes for some of its main titles in China after a positive reception for passes in overseas markets. Elsewhere, Tencent appears to be taking a hit from a slowing Chinese economy. Its online advertising revenue grew 25 per cent versus 55 per cent in the same period a year earlier, with Tencent blaming a “challenging macro environment” and high comparison base. Jefferies analyst Karen Chan said advertising revenue was lower than expected, though advertising gross margin improved.

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