Tencent is a major Chinese player on the Internet and especially in advertising and mobile applications, including QQ and Wechat, instant messaging applications used by more than one billion active users. The penguin brand created by Ma Huateng and Zhang Zhidong, one of the largest companies in the world, capitalizes $ 350 billion. Ma Huateng is the current general manager of the group.
Tencent’s market capitalization on October 9, 2018, is 2.723 trillion Hong Kong Dollars (HKD) or 347.55 billion US dollars 1, which places Tencent as the twelfth largest market capitalization in the world.
Tencent’s stock market price, which has been bearish since the end of January 2018, has made the top five world cap group top 12, which remains an incredible performance, especially for a company created just 20 years ago. Current 2017, Tencent generated 237.76 billion yuan Renmimbi RMB (34.33 billion US dollars 2) turnover for 72.47 billion Yuan Renminbi RMB (10.47 billion US dollar 2 ) profit. Its turnover is up 56.48% compared to 2016 and its profit up 74.85%.
In this article, you will discover the activities of Tencent such as its messaging applications, social networks or even video games. We will also talk about Tencent Music, the musical branch of Tencent to be introduced on the stock market at the end of the year.
TENCENT: CHINA’S LEADER IN INTERNET SERVICES, MOBILE APPS, AND ADS
QQ and Wechat are an integral part of the IM landscape in China as well as in many other countries. Hundreds of millions of users communicate daily via their smartphones on QQ and Wechat applications.
Tencent Games: online publishing and video games
Creator of the largest community of players in the world, Tencent Games is the world leader in mobile video games and all platforms (PC, consoles). The business model of Tencent Games, especially on smartphone games is a real commercial success. Tencent Games download for free. Only exclusive content is subject to fees.
Tencent Games’ recent big hits are the Arena of valor games, a multi-player fighting arena game or the mobile version of PUBG, also a fighting game. Tencent also owns the publishing companies of the global successes “League of Legends” and “Clash of Clans”.
TENCENT MUSIC: IPO
Tencent Music, a subsidiary of Tencent for its music streaming business, already has 800 million monthly users. Tencent’s subsidiary recently informed of its desire to enter the US stock market.
Valuation estimates are around $ 30 billion for the IPO of Tencent Music.
The music market in China is very affected by piracy, that is, most content is downloaded without associated payments. Tencent Music investors relations have intended to revolutionize this state of affairs by offering giant music platforms via subscriptions at reasonable prices. The subsidiary is currently the leader in music streaming in China and is experiencing strong growth, its IPO date is normally scheduled for this end of the year.
TENCENT ECONOMIC MODEL
Tencent’s business model is very relevant. It combines services with high added value serving simultaneously as an advertising base. Tencent’s advertising revenues represented 17% of total sales in 2017.
Unlike a purely advertising company that generally does not have the broadcast vector, in the case of Tencent; the group offers to advertise on its own applications already having hundreds of millions of subscribers. In addition, for mobile video games, for example, the download is free. Thus, the user starts to play and, if he likes the game, will then be tempted to spend a few cents to improve his gaming experience.
TENCENT STOCK MARKET: A SAFE BET?
Tencent is an Internet company, leader in China and present in many countries. Its main applications are QQ, Wechat, and Qzone. Hundreds of millions of users use these applications daily. Tencent Games is also an important subsidiary of Tencent.
The Tencent Music investor relations financial results have been growing strongly since its creation both in terms of turnover and profits. Tencent also has the advantage of having a high-profit margin above 30%.
From a stock market valuation point of view, however, Tencent seems relatively expensive because its current profitability is less than 3% and its equity is 9 times lower than its market capitalization.
It is important to qualify balance sheet valuation because, for this type of company, the intangible value of a community of hundreds of millions of people has a “huge” advertising value, marketing, data, thevistek etc.
In addition, investors who have Tencent shares since its IPO would have, so far, increased their investment.