China's Tencent Holdings Ltd. (TCEHY) posted stronger-than-expected earnings for its fiscal fourth quarter as the number of users of its signature WeChat messaging app topped 1 billion for the first time in the company's history.
Tencent, which is also a major stakeholder in Snap Inc. (SNAP) and the biggest tech firm in Asia by market value, said earnings for the three months ending in December rose 98% from the same period in 2016 to 20.797 billion Chinese yuan ($3.29 billion), well ahead of the Thomson Reuters forecast of 16.9 billion yuan, as sales jumped 51% to 66.392 billion yuan. The group also noted that the combined users on its messaging platform, WeChat, passed the 1 billion mark following the Chinese New Year, thanks in part to the growth of online games such as 'Honour of Kings', which drive more than 40% of the group's revenues.
"During 2017 and continuing in 2018, Tencent made important strategic moves that reinforced our leadership," said CEO Ma Huateng. "Looking forward, we are substantially increasing our investment in areas including video, payment, cloud, AI technologies and smart retail, which will impact our near term earnings but which we believe can generate long term value and growth opportunities."
Tencent shares closed at HK$462.60 each in Hong Kong Wednesday, prior to the release of its fourth-quarter earnings, down 0.9% on the session but still up 13.9% on the year compared to a 5% gain for the Hang Seng index benchmark. Tencent's U.S.-listed American Depository Receipts closed 2.45% higher yesterday in New York at $59.68 each. Tencent now has a market cap of $560 billion, meaning the Shenzen, China-based group trails only Apple Inc. (AAPL) , Google parent Alphabet (GOOGL) , Microsoft (MSFT) and Amazon Inc. (AMZN) in the global table of the world's most-valuable companies.
Tencent also said it may consider listing shares on the Shanghai Composite index in the near term following speculation that changes in rules for China Depositary Receipts, which are expected to be formalized in the coming months.
Tencent, which also owns the the mandarin-language YouTube rival, 'Tencent Video', has more than a billion active users and processes around 38 billion messages across it various platforms each day. It's also starting to expand its overseas interests and last year said it had built a 12% interest in Snap just hours after it revealed weaker-than-expected third quarter earnings and vowed to re-design its flagship messaging app.
Tencent told Snap that it purchased around 145.78 million non-voting Snap shares on the open market, taking its overall stake to the 10% threshold that requires formal notification.
"We have long been inspired by the creativity and entrepreneurial spirit of Tencent and we are grateful to continue our longstanding and productive relationship that began over four years ago," Snap said. "For its part, Martin Lau, Tencent's president, informed us that Tencent is excited to deepen its shareholding with us and that it looks forward to sharing ideas and experiences."
Snap shares were marked 1.06% higher in pre-market trading in New York Wednesday, indicating an opening bell price of $16.17 each, a move that would trim its week-to-date decline, which has been exaggerated by the massive slump in Facebook Inc. (FB) , to around 4.88%.
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