China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>Tencent reported 2Q23 revenue/non-IFRS net income (2.5%)/2.3% vs cons. Gaming was weaker than the street expected, while online advertising beat.</li>
<li>We expect gaming growth will improve slightly while advertising growth will decelerate in 3Q. </li>
<li>We maintain BUY but cut TP to HK$ 402 to reflect online gaming weakness.</li>
</ul>


Tencent reported 2Q23 revenue/non-IFRS net income (2.5%)/2.3% vs cons. Gaming was weaker than the street expected, while online advertising beat.
We expect gaming growth will improve slightly while advertising growth will decelerate in 3Q. 
We maintain BUY but cut TP to HK$ 402 to reflect online gaming weakness.


[Tencent (700 HK, BUY, TP HK$402) TP Change]: Cut TP to HK$ 402 to Reflect Weakness in Gaming

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Tencent announced 2Q23 results on 16 Aug: total revenue grew by 11% YoY to RMB149.2bn, in line with CMBI/consensus estimate.</li><li>Non-IFRS net income increased by 33% YoY to RMB37.5bn in 2Q23, beating CMBI/consensus estimate by 7/13%, mainly due to 1) better-than-expected ad revenue growth (+34% YoY); and 2) FBS/ad business GPM expansion (+5.1/8.3ppt YoY).</li><li>Tencent’s investments in Video Account, international games and business services continue to bear fruit, reaccelerating higher margin business segments growth and unleashing operating leverage. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

Tencent announced 2Q23 results on 16 Aug: total revenue grew by 11% YoY to RMB149.2bn, in line with CMBI/consensus estimate.Non-IFRS net income increased by 33% YoY to RMB37.5bn in 2Q23, beating CMBI/consensus estimate by 7/13%, mainly due to 1) better-than-expected ad revenue growth (+34% YoY); and 2) FBS/ad business GPM expansion (+5.1/8.3ppt YoY).Tencent’s investments in Video Account, international games and business services continue to bear fruit, reaccelerating higher margin business segments growth and unleashing operating leverage. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent  (700 HK) – Solid earnings growth on GPM expansion

APAC IPOs & Placements, Aequitas Research

Ethan Aw

APAC IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Lianlian DigiTech / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lianlian-digitech" target="_blank" data-smartkarma-citation="entities:39940:1" rel="noopener">Lianlian DigiTech (2104619D CH)</a> is looking to raise up to US$500m in its upcoming HK IPO.</li>
<li>LianLian DigiTech is a digital technology company that provides a range of digital payment services and value-added services to customers in China and around the world.</li>
<li>Lianlian’s digital payments segment has historically been its largest revenue contributor. However, profitability has been declining on the back of lower gross margins and mounting losses from its Liantong JV.</li>
</ul>



Lianlian DigiTech (2104619D CH) is looking to raise up to US$500m in its upcoming HK IPO.
LianLian DigiTech is a digital technology company that provides a range of digital payment services and value-added services to customers in China and around the world.
Lianlian’s digital payments segment has historically been its largest revenue contributor. However, profitability has been declining on the back of lower gross margins and mounting losses from its Liantong JV.


LianLian Digitech Pre-IPO - Declining Profitability with No End in Sight Just Yet

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> reported 2Q2023 results today. Revenue grew 11.3% YoY to RMB149.2bn (vs consensus RMB151.1bn) while reported OP increased 34% YoY to RMB40.3bn (vs consensus RMB44.6bn).</li>
<li>Rapid growth in ad business, video account monetisation and cost controls have contributed to Tencent’s 2Q2023 earnings despite domestic gaming business has slowed down.</li>
<li>Though Tencent’s 2Q2023 results show a recovery in earnings, we would interpret the company’s earnings with caution given the slowdown in domestic gaming and social networks businesses.</li>
</ul>



Tencent (700 HK) reported 2Q2023 results today. Revenue grew 11.3% YoY to RMB149.2bn (vs consensus RMB151.1bn) while reported OP increased 34% YoY to RMB40.3bn (vs consensus RMB44.6bn).
Rapid growth in ad business, video account monetisation and cost controls have contributed to Tencent’s 2Q2023 earnings despite domestic gaming business has slowed down.
Though Tencent’s 2Q2023 results show a recovery in earnings, we would interpret the company’s earnings with caution given the slowdown in domestic gaming and social networks businesses.


Tencent: Earnings Miss, Cost Controls Help Margins; Slowdown in Domestic Gaming Is Concerning

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

<ul>
<li>In 2Q23, online advertising and FinTech revenues continued to grow rapidly.</li>
<li>Game revenue was slow, but two existing games were still at the top of the game market.</li>
<li>The operating margin improve significantly, benefiting from the layoff last year.</li>
</ul>


In 2Q23, online advertising and FinTech revenues continued to grow rapidly.
Game revenue was slow, but two existing games were still at the top of the game market.
The operating margin improve significantly, benefiting from the layoff last year.


Tencent (700 HK): 2Q23, Ad and FinTech Recovering, Margin Higher, Buy

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

[Tencent (700 HK, BUY, TP HK$402) TP Change]: Cut TP to HK$ 402 to Reflect Weakness in Gaming

We expect gaming growth will improve slightly while advertising growth will decelerate in 3Q. We maintain BUY but cut TP to HK$ 402 to reflect...

Blue Lotus Research Institute

Tencent (700 HK) – Solid earnings growth on GPM expansion

Tencent announced 2Q23 results on 16 Aug: total revenue grew by 11% YoY to RMB149.2bn, in line with CMBI/consensus estimate.

CMB International

LianLian Digitech Pre-IPO - Declining Profitability with No End in Sight Just Yet

Lianlian DigiTech (2104619D CH) is looking to raise up to US$500m in its upcoming HK IPO. Lianlian’s digital payments segment has historically been...

Ethan Aw

Tencent: Earnings Miss, Cost Controls Help Margins; Slowdown in Domestic Gaming Is Concerning

Tencent's 2Q2023 earnings missed consensus. Rapid growth in advertising, video account monetisation and cost controls have contributed to earnings...

Shifara Samsudeen, ACMA, CGMA

Tencent (700 HK): 2Q23, Ad and FinTech Recovering, Margin Higher, Buy

In 2Q23, online advertising and FinTech revenues continued to grow rapidly. Two existing games were still at the top of the game market. The...

Ming Lu

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