Its always difficult to go through pages and pages of annual reports, balance sheets, analyst reports to arrive at an investment thesis. So I have a consolidated presentation collating key factors providing a Synopsis view of the company,
5 Point pitch to takeaway:
- Tencent valued at $420 Bn is a China based company which is the seventh largest in the world and second largest in Asia in terms of Market cap. Ma Huateng is the founder and chairman for Tencent
- Key business segments are Online Gaming, Wechat Social network entailing messaging, voice/video chat, Wechat pay based Payments and financial services, digital video contents and Tencent Music. In addition they have other venture capital/startup investments across the globe like Tesla, Activision, Ola, Lyft, Go-Jek, Snapchat etc
- Wechat and Weixing has combined 1 Billion monthly active users one third of users spend average of 4 hours/day in Tencent Apps like videos sharing, shopping. Their Mobile gaming is the world`s largest in the global $110 Bn gaming industry. Some of their famous games include PUBG, Candy crush saga (rights in China), League of legends, Call of Duty (rights in China), Clash of clans, Path to exile. Bought RIOT games, invested stake in SEA games, Supercell, Ubisoft and Grinding gear. Tencent owns 40% of Epic games who runs the famous Fortnite game that went viral
- Company had achieved revenue growth of 56% to $36 Bn and Net profit of $10.8 Bn in fiscal 2017. Management has done excellent capital allocation investing in new areas of growth in Artificial Intelligence (AI) and Cloud to augment the Core verticals of businesses which will start reflecting in years ahead. Tencent reported Free cash flow of $15 Bn in 2017 which makes the valuation at 28 times Free cash flow.
- Focus areas of the company are AI led advertising growth by User targeting, personalization leading to better advertising realizations and also the Cloud based subscription revenues applying to the core services like Videos, Tencent Music and Gaming businesses.
Below is the synopsis view curated: