Investors bullish about Tencent’s stock after annual results released

Chinese technology giant Tencent announced its annual report yesterday with revenues increased and a plan to double share buybacks, driving the stock’s price up.

The listed company reported a 7% rise in revenue for the three months ended Dec. 31, 2023, to 155.2 billion yuan (about HK$ 142.9 billion) from a year earlier and its annual revenue surged 10% to 609 billion yuan (about HK$ 560.6 billion)from 2022.

However, the net income during the three-month period ended Dec. 31, 2023, dropped 75% from the same period in 2022 because there’s a high base from gains from the disposal of Meituan shares last year. Besides, the annual net income in 2023 declined 39% from 2022, according to the company’s report.

The company decided to increase the dividend by 42% to HK$ 3.4 per share at the year-end, with its increased shares repurchasing scheme to over HK$ 100 billion this year.

The stock’s opening price edged up by 2.2% to HK$ 295.2 per share from yesterday’s close, and it closed at HK$ 290 per share, which is up 0.4%.

During 2023, four major segments, including value-added service (VAS), Online Advertising, FinTech and Business Services, and others, all achieved growth in revenue.

For value-added services, which increased by 4%year-on-year to 298 billion yuan, international online gaming increased 14%to 53 billion yuan, and domestic online gaming increased by 2%to 126 billion yuan.

“Several of our recent releases have performed well in terms of DAU(Daily Active User), and now are converting the DAU success to monetisation,” said Martin Lau, the president of Tencent, in the live streaming of the annual report.

“We will contribute to long-term stability and growth of our game portfolio; having a large portfolio of major hits illustrates our ability to continuously develop new major hits and operate multiple highly popular games at the same time,” Lau added.

Revenues from online advertising increased 23% to 101 billion yuan, driven by video accounts, weixin research and the upgraded advertising platform.

Fintech benefited from increased payment activities and higher revenue from wealth management services, while business services earned from e-commerce and cloud service, leading to a 15%-year-on-year growth in the segment.

Mark LI, 51, a retail investor who bought Tencent at HK$278 last year, said that he thought the 2023 annual report enhanced his confidence in investing in Tencent’s stock.

“Repurchasing shares at HK$100 billion is more than I have imagined, and I believe it can increase to around HK$300 per share,” LI said.

As a technology company mainly providing social networking services and online games, Tencent has the highest market capitalisation on the Hong Kong Stock Exchange, which is around HK$2.7 trillion in total.