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- Competition in China's mobile e-commerce industry is intensifying, yet Alibaba has 84.2% of market share.
- Tencent's recent investment in JD has yet to prove that it can convert WeChat users into JD buyers.
- Social commerce is not a threat as Tencent and JD assert. It complements rather than replaces e- and mobile commerce.
- Tencent and HBO formed an exclusive partnership in which Tencent will air HBO content.
- This is a major positive for Tencent due to exclusive content that makes it competitive against BIDU and YOKU.
- Subscription-based service is the long-term driver of Tencent video.
- Tencent's P&L missed consensus on weakness in legacy gaming side.
- Mobile monetization, particularly WeChat MAU growth, remains intact.
- Management calls gaming miss a one-off, the market seems to have given it one more chance.
China's Supreme Court Clears Tencent Of Monopoly Claims
Tencent Holdings: A Great Play On The Chinese Growth Story, But A Great Valuation?
- Tencent Holdings is a company that has enjoyed virtually unprecedented success in the social media landscape since its introduction of the WeChat technology.
- I believe Tencent Holdings has the potential to enjoy great success in China's growing e-commerce market.
- However, the company trades at a high valuation and high rates of growth in Dividends and Earnings per Share are needed to justify such valuations.
Baidu And Tencent Look Attractive With New E-Commerce Approach, Looming Alibaba IPO
- Baidu, Wanda and Tencent form joint venture to take on Alibaba in E-commerce.
- China's growing internet penetration and e-commerce suggest opportunities for multiple players.
- Joint venture was formed by the three richest men in China.
- Tencent’s Wechat 5.4 update could potentially compete against Baidu, Alibaba and the Chinese telcos.
- The search function likely to hit Baidu traffic, and the payment function diminishes the value of Alipay and audio calling, putting pressure on telco ARPU.
- Reiterate my bearish view on Baidu and Weibo.
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.
Tue, Dec. 16, 5:01 AM
- Tencent (OTCPK:TCEHY) has struck the latest in a string of music distribution deals, this time with Sony Music Entertainment (NYSE:SNE), as it teams up with labels to try to develop China's paid-for music market.
- In November, the company signed a similar music distribution partnership with Warner Music Group.
- Tencent is also investing heavily in content for its online video site, with a China streaming deal with U.S. network HBO and video subscription service through Disney.
Wed, Dec. 10, 1:35 PM
- After announcing the creation of the Emerging Markets ex-State-Owned Enterprises Index yesterday, WisdomTree rolled out the the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (NYSEARCA:XSOE) this morning.
- According to WisdomTree's blog post for the launch, XSOE "provides investors with a way to capitalize on the opportunities of emerging markets without the politics involved with state-owned enterprises."
- Top holdings in the fund include Tencent Holdings (OTCPK:TCEHY), Samsung Electronics (OTC:SSNHY) and Baidu (NASDAQ:BIDU); two companies out of China and one from South Korea.
- Other emerging market ETFs: EEM, VWO, EDC, EDZ, SCHE, IEMG, EEV, ADRE, EET, EUM, GMM, EEME, DBEM, EMCR, FEM, EWEM, EMLB, HEEM, EMSA, EMFT
Wed, Dec. 3, 11:05 AM
- After previously filing to sell 21.8M shares on behalf of existing holders at a maximum offering price of $22.72, JD.com (NASDAQ:JD) is selling 26M shares for them at a price of $23.80.
- China's second-biggest e-commerce firm also states Tencent (OTCPK:TCEHY), which took a 15% stake in JD and formed an alliance with the company prior to its IPO, has bought another $150M worth of shares through the offering. Hedge fund Tiger Global, another major JD investor, has purchased an additional $47.6M worth of shares.
- With a lockup expiration looming, JD's six biggest shareholders, which include Tencent, Tiger, and chairman/CEO Qiangdong Liu, have agreed not to sell shares "for a period of 90 days after the offering."
- Shares +14% over the last two days.
Tue, Nov. 25, 4:58 AM
- Looking to expand its audience in China, HBO (NYSE:TWX) has signed a deal with Tencent (OTCPK:TCEHY) to distribute its TV dramas and movies through the Chinese Internet giant’s online video site.
- Under the terms of the agreement, Tencent Video platform will be the exclusive online distributor of HBO programs in the country.
- The deal will begin in the near future.
Thu, Nov. 13, 9:07 AM
- Tencent Holdings (OTCPK:TCEHY) signs a deal with Warner Music Group to distribute music offerings to its massive array of users.
- The new pact broadens an existing relationship between the two companies.
- Warner has made a bigger push into China this year than rivals Vivendi and Sony Music Entertainment.
- Privately-owned Access Industries owns Warner Music Group.
Wed, Nov. 12, 3:10 PM
- Tencent (OTCPK:TCEHY +1.3% in Hong Kong) had Q3 revenue of RMB19.8B ($3.2B), +28% Y/Y but missing a consensus of RMB20.6B. Likewise, net income totaled RMB5.7B ($924M), +46% Y/Y but below an RMB6.2B consensus. Y/Y revenue growth slowed from Q2's 37%.
- WeChat monthly active users (MAUs) totaled 468M at the end of Q3, +7% Q/Q and +39% Y/Y. Q/Q growth slowed from Q2's 11%.
- The older QQ messaging/gaming platform finished with 820M MAUs (542M on "smart devices"), -1% Q/Q and +1% Y/Y. The Qzone social networking platform had 629M MAUs (506M on smart devices), -2% Q/Q and +1% Y/Y.
- Value-added service revenue rose 38% Y/Y to RMB16.1B, thanks to a 35% increase in online game revenue to RMB11.3B (57% of total revenue) and a 47% increase in social networks revenue to RMB4.7B. Online ad revenue +76% to RMB2.4B; e-commerce revenue -81% to RMB459M thanks to the JD.com partnership.
- Gross margin rose 900 bps Y/Y to 64%, which allowed op. margin to rise 700 bps to 38%. Sales/marketing spend rose 30% to RMB1.9B, and G&A spend 44% to RMB3.8B.
- Earnings Release (.pdf)
Mon, Nov. 10, 12:05 PM
- Momo, whose apps use location data to allow users to interact with others in close proximity (often for flirting/dating), has filed to raise up to $300M under the symbol MOMO. Morgan Stanley, JPMorgan, Credit Suisse, and China Renaissance are underwriting. (prospectus)
- Alibaba (BABA +1.4%) owns a 20.7% pre-IPO stake in Momo, and has a partnership through which targeted ads for Alibaba merchants are placed within Momo's apps. Alibaba and Momo share the revenue produced.
- As of Sep. 30, Momo had 180.3M registered users (+161% Y/Y), 60.2M monthly active users (+113%), 25.5M daily active users (+141%), and 2.3M paid subscribers. It had 1H14 revenue of $13.9M (compares with nothing a year earlier), and a net loss of $8.3M.
- After being declared a "hotbed of prostitution" by Chinese state media earlier this year, Momo has tried to re-brand itself as a family-friendly social networking platform for connecting people with similar interests. The company has also been working on location-based services that allow businesses to reach nearby users.
- Tencent (OTCPK:TCEHY), whose WeChat and Mobile QQ platforms tower over the broader Chinese mobile messaging market, remains a major rival; WeChat had 438M MAUs at the end of Q2.
Fri, Oct. 31, 6:49 PM
- Tencent's (OTCPK:TCEHY) MyApp Android app store is now seeing 100M daily downloads, up from just 76M in July. The figure covers both apps downloaded directly from the MyApp store, and from Tencent's WeChat and Mobile QQ messaging platforms.
- Qihoo and Baidu's 91 Wireless unit remain the leaders in China's fragmented Android app store market - 91 Wireless averaged 130M downloads/day in Q2. But the near-ubiquitous reach of WeChat/QQ within China, together with Tencent's mobile gaming clout, is helping Tencent gain ground.
- Separately, Tencent, which is best known for its consumer offerings, has signed an MOU with IBM to jointly sell cloud apps and related services to Chinese SMBs. Tencent's cloud services unit will host the apps, and IBM will provide consulting and IT services.
Wed, Aug. 27, 3:36 AM
- A 5B yaun ($813M) e-commerce joint venture between China's privately-held Dalian Wanda Group, Baidu (NASDAQ:BIDU) and Tencent Holdings (OTCPK:TCEHY, OTCPK:TCTZF) will be announced later this week, Reuters reports.
- The new venture will unite three of China's most powerful non-state companies, and will be 70% owned by Wanda and 15% held by Baidu and Tencent respectively.
- Wanda is a commercial property, luxury hotel and film conglomerate.
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.
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