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Tencent's market value soars as much as $34 billion after forecast-beating first-quarter

Reuters  |  HONG KONG 

By Sijia Jiang

KONG (Reuters) - Robust earnings from sent its market value surging by as much as $34 billion on Thursday, helping the Chinese reclaim the mantle of Asia's most valuable listed company.

The and gaming firm had posted on Wednesday better-than-expected net profit and gross profit margin for the first quarter, driven by the strong performance of its mobile gaming business and gains in its sprawling investment operations.

The results helped offset worries about pressure on Tencent's margins as it spends heavily in areas such as gaming, entertainment, retail and for growth amid stiff competition from Holding and others. Those concerns have weighed on Tencent's shares this year.

The shares climbed 7.1 percent to an intra-day high HK$424.20, their biggest daily rise in nearly three years, before shedding some of the gains to be up 5.1 percent in the afternoon and giving it a market value of about $504 billion. At the day's high, its market capitalisation was about $514 billion, surpassing Alibaba's $507 billion.

Despite the share jump on Thursday, Tencent's market value, at current exchange rates, is some $70 billion lower than its January peak.

Tencent's first-quarter profit soared 61 percent and revenue climbed 48 percent. Its gross margin was 50.4 percent, the first sequential rise since mid-2015.

A major contributor to the bottomline was investments by Tencent, which brought in 7.6 billion yuan in gains. The company made 120 deals in 2017 alone, according to Bernstein's research, including in U.S. and owner

In a note, called it "a stellar set of results" and raised its target price on the stock to HK$530 from HK$490. raised its target price to HK$546 from HK$535.

Jefferies, however, cut its target price to HK$515 from HK$530, saying in a note that while Tencent's gross profit margin was higher than expected, the push to grow revenues from its advertising and financial services business might continue to weigh on the firm's margins. lowered its target price for the stock to HK$523 from HK$540.

Tencent said on Wednesday that delays in earning revenues from games in and heavy marketing expenses would hit mobile games revenue in the short term, a warning that played into Natalie Wu's call to maintain her target price for the stock at HK$540.

"We expect the share price to bounce back after a period of weakness recently, but as game business prospects may not be as good as 1Q results seemed to indicate, we suggest not riding if the share price rebounds strongly," she wrote in a note.

($1 = 7.8496 Kong dollars)

(Reporting by Sijia Jiang; Editing by and Muralikumar Anantharaman)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, May 17 2018. 16:00 IST
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