Honour of Kings bolsters Tencent Holdings profits
China’s largest corporation reports 70% income rise to record 18.2 billion yuan
Tencent’s market valuation is near record highs. Photograph: Reuters
Tencent Holdings posted a quarterly profit that surpassed all estimates as its marquee title Honour of Kings drove a 54 per cent surge in mobile gaming revenue.
China’s largest corporation reported a 70 per cent surge in net income to a record 18.2 billion yuan ($2.7 billion) for the three months ended June, exceeding the 13.5 billion-yuan average of estimates compiled by Bloomberg.
Sales rose 59 per cent to 56.6 billion yuan, also topping projections.
Tencent’s market valuation is near record highs, fuelled by expectations it will continue to tap the spending power of 200 million gamers on Honour of Kings and deliver more hits.
The title’s popularity helped sales from smartphone play overtake desktops for the first time. The still-nascent advertising and finance business on instant messaging app WeChat has also boosted investors’ confidence it can compete with ad-leader Alibaba Group Holding and sustain growth.
“Mobile games revenue grew fast, benefiting from titles like Honour of Kings,” said Li Yujie, an analyst with RHB Research Institute Sdn in Hong Kong. “Advertising business also topped our expectations and grew at a healthy speed.”
Shares of Tencent rose 1.4 per cent on Wednesday and have gained 70 per cent this year, compared with an 80 per cent rise for New York-listed Alibaba.
Revenue from Value Added Services, which includes online games and messaging, climbed 43 per cent to 36.8 billion yuan. Online advertising sales rose 55 per cent to 10.1 billion yuan.
WeChat had 963 million monthly active users, up 19.5 per cent from the previous year. But the mobile version of QQ, Tencent’s other mainstay social network, had 3.9 per cent fewer users at the end of the quarter.
“Tencent’s existing games and pipeline continue to draw new gamers and revenue,” Morgan Stanley analysts led by Hong Kong-based Grace Chen wrote in a report ahead of the results release.
They also foresee “strong growth potential in performance advertising and surging revenue growth in the payments business”.