Games: Alibaba's New Tie-Up, Tencent's Candy Crush
- We think an intrinsic value estimate is a vital step in any investment-decision process, regardless of the business model.
- Tencent's future growth opportunities are tremendous, and its ValueCreation rating is solid.
- We value shares just north of $70 each, implying modest upside.
Tencent Ties Up With Korean Gamer, Eyes Youku Tudou
After WhatsApp Buy, Facebook Faces Stiff Competition From Tencent's WeChat
- Facebook will face considerable competition from competitors in the East.
- WeChat's footprint is greater than that of WhatsApp.
- Even with FB's acquisition of WhatsApp, FB continues to lag in the message space.
Tencent Holdings: Emerging Market Stock Of The DayEmerging Money • Nov. 15, 2012
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Tue, Aug. 19, 11:25 AM
- Canada's Alimentation Couche-Tard (OTCPK:ANCUF) and China's Tencent Holdings (OTCPK:TCEHY, OTCPK:TCTZF) reportedly are among suitors on the short list to buy a $16B minority stake in China's Sinopec Sales (SNP, SHI), the world's largest fuel retail network.
- Sinopec plans to sell up to 30% of Sinopec Sales by year-end 2014 as China restructures government-owned assets; while a deal would give investors little control over the company, a likely exit through an IPO planned within three years appears to have attracted a wide range of suitors.
- Sinopec Sales booked a net profit of 25.1B yuan ($4.1B) in 2013 from 30K-plus service stations and 23K-plus convenience stores.
Wed, Aug. 13, 12:38 PM
- Tencent (OTCPK:TCEHY) had Q2 revenue of RMB19.75B ($3.21B), +37% Y/Y and above an RMB19.2B consensus. Net income rose 59% to RMB5.84B ($948M), above an RMB5.51B consensus.
- WeChat monthly active users (MAUs) rose 11% Q/Q and 57% Y/Y to 438M. MAUs for Tencent's older QQ messaging/gaming platform totaled 829M, -2% Q/Q and +1% Y/Y. MAUs for the Qzone social networking platform totaled 645M, flat Q/Q and +3% Y/Y.
- 521M QQ MAUs and 497M Qzone MAUs are now respectively using "smart devices."
- Total value-added service (VAS) revenue rose 9% Q/Q and 46% Y/Y to RMB15.7B. Within the segment, online gaming revenue rose 7% Q/Q to RMB11.1B, thanks largely to mobile growth - Tencent recently disclosed it now has 600M+ mobile gaming users. PC gaming revenue was "broadly stable." Social networking revenue rose 15% Q/Q to RMB4.6B, thanks largely to mobile.
- Online ad revenue rose 59% Y/Y to RMB2.1B, aided by video/social ad growth. E-Commerce revenue fell 40% to RMB1.3B, thanks to the JD.com (JD +4.3%) partnership. JD shares are rallying.
- Gross margin rose to 62% from 54% a year ago, and op. margin to 40% from 32%. Tencent cautions mobile gaming revenue could be flat in 2H14, as the company focuses on optimizing the user experience.
Fri, Aug. 8, 1:54 PM
- The Chinese government is requiring mobile messaging users with public accounts (celebrities, businesses, etc.) to register with their real names. It's also banning the sharing of "unauthorized" political news.
- The curbs are aimed in large part at Tencent's (OTCPK:TCEHY) WeChat, which has grown like wildfire and evolved into a platform for gaming, e-commerce, and much else. WeChat had 396M monthly active users at the end of Q1; Tencent should report a figure well above 400M during its Aug. 13 Q2 report.
- SINA's Weibo (NASDAQ:WB) has long been dealing with government crackdowns. A number of Weibo users have defected to WeChat in past quarters, while citing greater privacy and lighter censorship.
- At the same time, China is flat-out banning two Korean WeChat rivals: KakaoTalk and Naver's (OTC:NHNCF) Line. Line, the top mobile messaging platform in Japan, is set to go public in NYC and Tokyo.
Thu, Jul. 31, 7:25 PM
- Alibaba (Pending:BABA) is investing $120M in social/casual game developer Kabam at a $1B+ valuation. The companies will also partner to distribute popular Kabam mobile games through Alibaba's apps, including Mobile Taobao and the Laiwang messaging app.
- With Kabam having posted $360M in 2013 revenue and already on pace to do $550M in 2014, Alibaba is buying its stake at fairly low multiples. The deal could be a precursor to a Kabam IPO. "We continue to at the board level have discussions about an IPO and are constantly valuing the markets," says COO Kent Wakeford.
- Alibaba's move is aimed at Tencent (OTCPK:TCEHY), which continues to tower over the Chinese gaming market. Tencent's mobile game revenue soared 200% Q/Q in Q1 to RMB1.8B ($292M), and accounted for 17% of its its total gaming revenue.
- Alibaba launched a mobile game-publishing platform in January, and has been trying to win developer support by letting them keep a relatively steep 70% of revenue.
- Yesterday: Alibaba reportedly looking to invest in Snapchat
Fri, Jun. 27, 9:57 AM
- Chinese messaging/gaming giant Tencent (TCEHY) is paying $736M to buy a 19.9% stake in local online classifieds leader 58.com (WUBA -1.4%).
- Tencent is paying the equivalent of $40/share for its stake - 23% below 58.com's current trading levels. 58.com will use some of the proceeds to buy back 27.6M shares ordinary shares (the equivalent of 13.8M ADS) from pre-IPO holders.
- 58.com's services will be integrated with Tencent's QQ and Weixin (WeChat) messaging platforms, which are nearly ubiquitous in China. Both companies have also "agreed to use each other as [their] preferred partner in local services."
- The investment is the latest in a string of major deals by Tencent meant to solidify its Web/mobile empire as it battles with Alibaba and Baidu on a variety of fronts. The latter two companies haven't been standing idly either.
- It looks like some investors knew in advance: 58.com's shares rose 13.8% yesterday ahead of the announcement.
Mon, May. 26, 8:34 AM
- South Korean mobile-messaging service Kakao has agreed to acquire Web portal Daum Communications in a reverse takeover that values Kakao at 3.1T won ($3B) and gives it a listing on the Korea Exchange.
- Kakao is on 93% of smartphones in its home country and has 140M users worldwide, although that's well below WhatsApp's 500M.
- The deal comes despite Kakao, which is partly owned by Chinese Internet firm Tencent Holdings (TCEHY), planning an IPO for next year.
- The transaction is the latest to involve a major messaging service this year, including Facebook buying WhatsApp for $19B.
Wed, May. 14, 2:19 PM
- Tencent (TCEHY +8.4%) trades higher after reporting better than expected Q1 earnings, as net income soared 60% Y/Y to 6.46B and easily beating the analyst consensus estimate of 4.04B yuan.
- Q1 revenues rose 36% Y/Y to 18.5B yuan; online gaming sales jumped 39%, contributing 56% of Tencent’s total revenue.
- Mobile gaming revenue is beginning to make a significant contribution to revenue, with sales soaring 200% Q/Q to 1.8B and representing 17% of Tencent’s total gaming sales, up from 7% last quarter.
- WeChat and QQ, the two messaging programs, claim 396M monthly active users, up 11.5% Q/Q, and the number of monthly active users for Tencent’s instant messaging service is 848M.
- Numbers like these no doubt will help feed the anticipation for Alibaba’s (ABABA) upcoming IPO.
Mon, May. 12, 11:04 AM
- JD.com, China's second-biggest e-commerce firm behind Alibaba, is looking to sell 93.7M shares (69M from the company, 24.7M from existing holders) in a range of $16-$18. At the midpoint of its range, JD would be raising $1.17B, and have a valuation of $23.2B (2x trailing sales). (prospectus)
- The company will trade under the symbol JD. IPO underwriters include BofA/Merrill, UBS, Barclays, Jefferies, Oppenheimer, Piper, SunTrust, and Cowen.
- JD.com had 2013 revenue of $11.45B (+68% Y/Y), and a net loss of $8M. Gross margin was 9.9%, and fulfillment spend accounted for 6% of revenue.
- A Tencent (TCEHY) affiliate owns a 14.3% stake going into the IPO. The company recently invested $214.7M in JD, while also agreeing to transfer multiple e-commerce properties and forming an alliance that covers payments integration for its WeChat mobile messaging platform.
- Founder Richard Liu remains JD's largest shareholder, and will have 83.7% voting power post-IPO. Hedge fund Tiger Global also has a big stake.
- JD kicked off its IPO roadshow today, six days after Alibaba filed for an IPO. The FT reports JD has already received enough orders to cover its books.
- Previous: JD.com files for $1.5B IPO
Tue, May. 6, 10:37 AM
- Tencent (TCEHY) has bought an 11.3% stake in Chinese online maps provider NavInfo for $187M.
- The deal comes as Alibaba gets set to acquire the 72% of NavInfo rival AutoNavi it doesn't yet own at a $1.5B valuation. Baidu also offers a popular digital mapping service; Tencent, for its part, has already rolled out a Google Street View-like service for China, and invested in local mapping upstart Linktech Navi.
- Separately, Tencent is rolling out a reference platform for hardware supporting a slew of services offered by its QQ PC messaging/gaming platform (has ~800M MAUs). TechNode reports hearing a reference platform Tencent's WeChat mobile messaging services (355M MAUs) is also on tap.
Mon, Apr. 28, 10:17 AM
- Sohu (SOHU -4.8%) missed Q1 estimates and provided light Q2 guidance. Meanwhile, as part of a recent crackdown, the Chinese government has pulled The Big Bang Theory and other popular U.S. shows from sites such as Sohu.com, Youku.com (YOKU -4.4%), Baidu's (BIDU -5%) iQiyi, and Tencent Video (TCEHY -2.8%). Time observes The Big Bang Theory has produced 1.3B video views since launching on Sohu TV in '09.
- The news is overshadowing a $1.22B investment in Youku by Alibaba (ABABA) and an affiliated P-E firm, and a WSJ report stating Alibaba is forming a mobile search JV with leading mobile browser firm UCWeb (once targeted by Baidu).
- The deals are the latest in a long line of investments and partnerships struck by Alibaba, Tencent, and Baidu, as each firm tries to build a Web/mobile empire covering over a dozen valuable markets.
- Is Qihoo (QIHU -0.8%) next in line to make a deal? With a $21.6B market cap, the security app/browser/search provider and Baidu rival is the biggest Chinese Internet company to remain independent of the big-3. Qihoo was reported in January to be talking with Alibaba.
- Other decliners: NQ -6.5%. VIPS -5.2%. WB -4.2%. WBAI -3%. LONG -4.5%. QUNR -2.4%.
Wed, Apr. 16, 9:18 AM
- KING Digital is partnering with Chinese gaming/messaging giant Tencent (TCEHY) to bring Candy Crush Saga to the Middle Kingdom. The game will be distributed via both Tencent's QQ (PC messaging, 808M MAUs) and WeChat/Weixin (mobile messaging, 355M MAUs) platforms.
- Candy Crush was responsible for 93M of King's 128M average Q4 DAUs. But bookings and unique payers started to slip in Q4 after seeing meteoric growth over much of 2013.
- King is counting on newer titles such as Pet Rescue Saga and Farm Heroes Saga - they're promoted via Candy Crush and have moved up Facebook charts, but are nowhere are large right now - to help pick up the slack.
Thu, Mar. 27, 2:15 PM
- Tencent (TCEHY) is continuing its torrid investment pace by pouring $500M into major Korean game developer CJ Games for a 28% stake.
- Tencent is by far China's biggest gaming firm; its Q4 online gaming revenue totaled $1.4B. But the company's PC gaming growth has been pressured some by high penetration rates for its social networking/IM platforms, as well as the mobile shift.
- This month has already seen Tencent invest in #2 Chinese e-commerce firm JD.com and real estate site Leju. The company is also rumored to be near a deal for a 20% stake in Chinese online video leader Youku.
Wed, Mar. 26, 9:19 AM
- A source close to Youku (YOKU) tells Marbridge Consulting Tencent (TCEHY) has reached a tentative deal to buy a 20% stake in the Chinese online video platform for at least $300M in cash. Tencent would merge its own sizable online video business into Youku as part of the deal.
- Marbridge has a mixed track record with M&A rumors. Youku rallied last July on a rumor from a Chinese site regarding a Baidu stake purchase.
- Helping Marbridge's report appear plausible: Tencent has already spent nearly $400M this month to buy stakes in e-commerce firm JD.com and real estate site Leju, as it battles with Baidu and Alibaba for Chinese Web/mobile supremacy on a number of fronts.
Fri, Mar. 21, 9:01 AM
- E-House Holdings (EJ) is ahead 8.6% premarket after Tencent (TCEHY) pays $180M for 15% of E-House's online real estate services provider Leju Holdings. Tencent will add to its stake once Leju's proposed IPO takes place.
- The investment - expected to close by month's end - gives Leju a valuation of about $1.25B.
- Previous: Leju files for IPO and announces partnership with Tencent.
Wed, Mar. 19, 6:35 PM
- A 39% Y/Y jump in sales/marketing spend led Tencent's (TCEHY) Q4 net income to come in at RMB3.91B ($631M), below a consensus of RMB4.1B. While net income rose 13% Y/Y, revenue rose 40% to RMB17B ($2.74B). (PR -. pdf)
- Value-added services revenue (inc. gaming and subscriptions), pressured some by the mobile shift, rose 21% Y/Y to RMB11.9B, and made up 70% of revenue. Online ad sales rose 58% to RMB1.5B, and e-commerce transaction revenue nearly doubled to RMB3.3B.
- Monthly active users for Tencent's WeChat mobile messaging platform (dominant in China) totaled 355M, +6% Q/Q and +121% Y/Y after accounting for a methodology change. That makes WeChat's MAU base nearly 3x that of Sina's Weibo, and 24% smaller than WhatsApp's 465M (as of February).
- Not surprisingly, Tencent's PC platforms (huge Chinese penetration rates) are seeing little user growth. MAUs for Tencent's Qzone social networking platform rose 4% Y/Y to 625M, and instant messaging MAUs rose 1% to 808M.
- Shares fell 4.4% in OTC trading today. Tencent's report arrived after overnight trading in Hong Kong ended.
Mon, Mar. 10, 10:26 AM
- As rumored, Tencent (TCEHY) is buying a 15% stake in top Alibaba (ABABA) rival JD.com ahead of its IPO.
- Tencent is paying $214.7M in cash. The company is also transferring its QQ Wanggou and Paipai e-commerce platforms, and a minority stake in its Yixun marketplace.
- The assets, along with the massive scale of Tencent's QQ, Qzone, and WeChat messaging/gaming/social networking platforms, should give a boost to JD.com's traffic and marketing reach.
- JD.com, which (unlike Alibaba) depends heavily on direct e-commerce sales, filed for a $1.5B IPO in January. Alibaba took aim at Tencent last year by acquiring an 18% stake in Sina's Weibo microblogging platform (an indirect rival to WeChat).
- The Tencent/JD.com deal could also spell tougher competition for Vipshop (VIPS -4.4%) and Dangdang (DANG -4.9%), both of whom are joining other Chinese Internet stocks in seeing profit-taking.
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