TENCENT HOLDINGS
Tencent Holdings Limited $0700.HK (Tencent) has released its financial results last week for the second quarter ("2Q2021") ended June 30, 2021. I would reproduce some key highlights hereinbelow.
KEY HIGHLIGHTS FOR 2Q2021
Its total revenues were RMB138.3 billion, an increase of 20% over the second quarter of 2020 ("YoY"). On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:
- Operating profit was RMB42.8 billion - increase of 14% YoY.
- Profit for the period was RMB35.1 billion - increase of 13% YoY.
- Profit attributable to equity holders of the Company for the quarter was RMB34.0 billion - increase of 13% YoY.
- Basic earnings per share were RMB3.574 and Diluted earnings per share were RMB3.504.
The 2Q2021 financial review for each segment is also reproduced below.
VALUE ADDED SERVICE (VAS)
Revenues from VAS increased by 11% to RMB72.0 billion for the second quarter on a year-on-year basis. Games revenues increased by 12% to RMB43.0 billion. Mobile games VAS revenues increased by 13% to RMB40.8 billion, while PC client games revenues grew by 1% to RMB11.0 billion for the second quarter of 2021. Social networks revenues grew by 9% to RMB29.0 billion, mainly due to revenue growth from digital content services, as well as in-game virtual item sales.
ONLINE ADVERTISING
Revenues from Online Advertising increased by 23% to RMB22.8 billion for the second quarter of 2021, reflecting rising demand from advertiser categories such as Internet services and consumer staples, as well as consolidation of Bitauto's advertising revenue, which outweighed weakness in education. Social and others advertising revenues grew by 28% to RMB19.5 billion, due to increased adoption of Mini Programs as landing pages, more video advertising inventories inside Weixin Moments, as well as revenue growth from the mobile advertising network. Media advertising revenues were RMB3.3 billion, broadly stable compared to the second quarter of 2020, as greater advertising revenues from the music apps offset lower news advertising revenues.
FINTECH AND BUSINESS SERVICE
Revenues from FinTech and Business Services increased by 40% to RMB41.9 billion for the second quarter of 2021 on a year-on-year basis. FinTech Services revenue growth primarily reflected increasing digital payment transactions. Business Services revenues increased rapidly year-on-year, due to digitalisation of public services and traditional industries, as well as consolidation of Bitauto's Business Services revenue.
In short, revenue growth for all 3 core segments was solid. Overall, it was up 20%.
WHAT THE CEO HAD SAID?
The CEO of TENCENT, Pony Ma Huateng said:
"In the quarter, we enhanced our services and achieved healthy growth rates across our business lines, particularly Business Services and advertising, while our game revenue benefitted from international growth. We are increasingly deploying our technologies and expertise to help SMEs, public services, corporations collaborate internally, and connect with their users externally, which we believe contributes to the real economy and to society at large. During the recent Henan floods, Tencent Docs, our cloud-based productivity solution, played a valuable role assisting people providing and seeking help, thanks to its collaborative data editing functionality."
MY TAKE
I am still positively in holding TENCENT in my portfolio. From the latest financial results released last week, the fundamental of the company still intact and remain solid. Thus, I see no reason to make any investment adjustment to my portfolio in Chinese companies, especially, TENCENT HOLDINGS.
PORTFOLIO PERFORMANCE
As of today, my portfolio for current month of August is down 2.63% mainly due to the bearish stocks in Chinese companies that I have invested in $BABA (Alibaba) , $03690.HK (Meituan Class B) and $0700.HK.
Since the inception of our fund in May 2020, we have been up close to 41.51%. We are still able to maintain our risk level at 3 or 4 as can be seen from the “average risk score”.
Stay safe.
MNMLH
21.08.2021
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