Tencent beats Jack Ma' s Alibaba to become first Asian company valued over US$500b

CHINA' S Tencent just became the first Asian company to crack the illustrious US$500 billion club.

The Hong Kong-listed Internet giant, known for its WeChat messaging app and online games, saw its shares rally to HK$420 on Monday, bringing its market value to HK$3.99 trillion (S$693.59 billion) at the close.

With that line crossed, Tencent is now closing in on the likes of Facebook and Amazon. Top of the pole is Apple, with pundits predicting the iPhone maker could be the first to break the US$1 trillion mark in the months ahead.

Tencent' s market cap is also now above Jack Ma' s e-commerce giant Alibaba Group Holding, which stands at US$474.15 billion, with Baidu far behind at US$82.97 billion.

 

It brings the personal wealth of Tencent' s founder and chief executive Ma Huateng - also known as Pony Ma and no relation to Jack - close to US$47 billion.

 

Tencent' s stock this year alone is up 121.4 per cent. The shares have rallied 11,251 per cent since the company went public in 2004 at at HK$3.70 a share. Analysts say it can go further.

" Some of this year' s best performers are worth holding as long-term bulls," said Wang Menghai, a Shanghai-based money manager at Fullgoal Fund Management Co told Bloomberg. " It would be a wrong decision to sell it just for some short-term gain."

 



 

CNBC credits Tencent' s meteoric rise to its continued revenue growth, massive user base and investments into new areas. Last week, the Chinese company reported a 69 per cent year-on-year rise in net profit for the third quarter to 18 billion yuan (S$3.7 billion), beating market forecasts.

Its WeChat, China' s most popular messaging service, has close to one billion users.

Online and mobile games, another big revenue stream, brought in over US$4 billion in sales last quarter. Its fantasy role-playing game Honour of Kings, which is based on Chinese historical characters, is so popular that Tencent had to introduce curbs on play time earlier this year after reports of children being seriously addicted to it. The game will debut in the US next year.

Tencent also acquired a majority stake in Finnish smartphone maker Supercell, the company behind the popular " Clash of Clans" mobile game.

Other fast-growing parts of the business include digital content such as video, as well as online advertising, said CNBC.

Tencent president Martin Lau said in last week' s earnings call that its Youtube equivalent, Tencent Video, has become the video streaming service with the largest paying subscriber base in China, at 43 million subscriptions.

Over the past year, several of Tencent' s subsidiaries have made stellar debuts on stock exchanges in Hong Kong and the US, most recently its online publishing platform China Literature which nearly doubled in price on its firt trading day earlier this month.

Their genuine prowess aside, the Financial Times points out that the rise of China' s tech giants has been greatly aided by Beijing' s ban on the US titans - Facebook, Twitter, YouTube and Google. There is nothing to rival WeChat and while Amazon was let in, it was quickly quashed by Alibaba' s Tmall and Taobao e-commerce sites.

Tencent turns to WeChat, games and deals for global strategy

[HONG KONG] China' s biggest social network and gaming firm Tencent Holdings, which last week reported forecast-beating quarterly results, is close to making Malaysia the first foreign country to roll out its WeChat ecosystem, an executive told Reuters.

Tencent has made a " breakthrough" in gaining an e-payment license in Malaysia for local transactions, and plans a launch early next year, senior vice president SY Lau said in an interview.

The move pits Shenzhen-based Tencent, Asia' s most valuable listed company, against rival Alibaba Group as they scramble for new growth opportunities outside China.

" Malaysia is actually quite large in the sense that we have 20 million WeChat users, huge potential, and the market is quite warm towards internet products from China," Mr Lau said.

 

Southeast Asia, home to more than 600 million people and some of the world' s fastest-growing economies, has been a key battleground for China' s tech titans fighting for deals. Ethnic Chinese make up more than a fifth of Malaysia' s population.

 

WeChat Pay and Alibaba' s Alipay, which dominate China' s digital payment market, have sought to expand their global footprint, although that push has so far been limited to payment services for Chinese outbound tourists. They can scan-and-pay for purchases in 34 countries or regions via Alipay and 13 via WeChat Pay, according to the companies.

Alipay' s parent company Ant Financial has joint ventures in seven markets for local digital payments services, which operate independently under the partnerships' brand names.

Alibaba is looking to build a global payment system, while Tencent is more interested in generating traffic for WeChat - two different strategies, some bankers and investors say.

WeChat has more users, but Alipay' s aggregate transaction volume is higher, according to JP Morgan' s John Hall, though other investors note that WeChat Pay can also process large transactions if it' s used on e-commerce platforms.

One challenge for Tencent, say analysts, is that its success in China cannot be easily exported to other markets.

Tencent is " not in a hurry" to speed up its overseas expansion or increase the monetisation rate of its digital assets, Mr Lau said.

" We walk our own path at our own pace ... and, to be honest, there is really quite a lot to do in China," he said.

WeChat, which has ballooned from a messaging app to an all-in-one platform with 980 million monthly active users, could be the " killer product" to spearhead expansion abroad, Mr Lau said, as its embedded payment function draws more services.

WeChat, with an open platform of mini-programmes, was a key revenue contributor for Tencent in the third quarter. Social and other advertising revenue rose 63 per cent, while payment and cloud helped " other business" post a 143 per cent jump " Honour of Kings" , Tencent' s top-grossing battle game that led an 84 per cent increase in quarterly smartphone gaming revenue, also owes its success to the network help of WeChat, and is expected to find it tougher to crack Western markets, analysts say.

Tencent this month delayed the launch of the game' s US edition, " Arena of Valor" , to next year to " further polish additional gameplay and social features" .

After games and social media, most of Tencent' s other businesses are in digital content, including Spotify equivalent Tencent Music and YouTube equivalent Tencent Video, which also makes its own dramas.

Mr Lau said the ultimate aim was to export culture from China to the rest of the world, rather than the other way round, which he acknowledged was challenging.

" What we' re aiming to create is ' super IPs' (intellectual property) that leverage our different businesses from upstream to downstream," Mr Lau said, citing Disneyland and the James Bond movies as successful practices in the West.

A big business for Tencent' s recently-listed publishing arm, China Literature, is to sell its popular novels and have them turned into dramas and video games by Tencent' s other business lines.

Tencent this month announced a plan involving 10 billion yuan ($1.51 billion) of investment to boost its creative content ecosystem, though it gave no timeframe for the investment.

Company president Martin Lau - no relation to SY - said on an earnings call last week that Tencent would keep investing in digital content, especially online video, to draw more time from more paying customers.

Overseas acquisitions will remain a key way of enhancing Tencent' s global access and competitiveness, SY Lau said.

Independent technology analyst Richard Windsor said Tencent' s 2016 acquisition of Supercell gave it a strong position in gaming, while the move to buy a stake in social media firm Snapchat is another piece in the jigsaw.

" It increasingly looks as if Tencent is embarking on a circumnavigation of the digital life pie in order to build an ecosystem to challenge the Google, Apple, Amazon, Facebook dominance of consumer digital services," he said, noting it' s at a " super early stage" in that process.

Tencent will likely seek more overseas acquisitions, Mr Windsor added, which, beyond being expensive, could challenge Tencent in integrating all its digital assets at home and abroad.

Tencent has struggled to monetise its dominance over the Chinese digital life, he said, adding that' s why he sees more upside in Tencent' s market valuation, and prefers it to Alibaba.

REUTERS

Your US$9,000 Tencent IPO stake is now worth US$1 million as Chinese internet company joins Facebook, Apple as US$500 billion tech giant

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