Tencent

A chinese internet giant that probably doesn’t get talked about enough reported earnings this morning.

'HONG KONG—Tech titan Tencent Holdings Ltd. indicated it was doubling down on investments in China’s mobile-first world to ensure it remains a central presence on the smartphones carried by nearly 800 million Chinese users.

Tencent executives signaled they remained bullish on investments in video, artificial intelligence and mobile payments. “Many of the current achievements are really results from investments we made years ago,” said Tencent President Martin Lau at a Wednesday press conference.

The plans emerged as the Shenzhen-based company said its fourth-quarter revenue grew 51% year over year to 66.4 billion yuan ($10.2 billion), boosted by strong growth in mobile payments, digital content subscriptions and advertising on its flagship mobile social apps, WeChat and QQ. Its earnings, meanwhile, nearly doubled from the same period a year ago to $3.2 billion.

The numbers reflected shifts in China’s internet crowd. As of December, China had 772 million internet users, up 2.6% from the year before, with nearly 98% of those being mobile internet users, according to the China Internet Network Information Center. Mobile video users grew by 9.7% and mobile payment users grew by 12%.’

Stock is down slightly this morning.

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ps Long TenCent, didn’t mean to leave that out.

Yep - Tencent, Ali Baba and Facebook are the fastest growing mega caps in the world with growth rates ~50%.

Tencent and Ali Baba are experiencing 50% growth in core business, spinning out unicorn IPOs left right and center whilst seed funding more unicorns in the making with their own incredible cash and stock positions.

Tencent has added functionality and monetised WeChat in ways that Facebook can’t even dream of with WhatsApp and is a highly trusted brand in China (much more so than your average and more than Ali Baba).

I own Tencent on the HK market and BABA on the US market. I’m very happy with both.
Ant

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this is an oversimplification, but in general it seems some of the Chinese titans have US equivalencies:

BABA = Amazon, but they also own YouKu Tudou (think YouTube) which they acquired in 2015.
Tencent = Facebook/WhatsApp
Baidu = Google

others:
Weibo = Twitter
BZUN = Shopify
JD = unsure…believe it is a poor man’s BABA in ecommerce.

I like Baidu because they are a top search provider, invest heavily in AI (autonomous driving) and are about to spin out iQiyi in an IPO shortly (a Netflix-like streaming service). They are near a high now, but took a hit a few years back in their version of Google/FB fake news and the Chinese Govt cracked down on them a bit. They have weathered that, shedded non-core businesses and future seems bright. Their market cap is about $90b and they have not have the stock appreciation of BABA and Tencent, so another reason I like the upside.

BZUN is focusing more on services side now, which is growing 50% y/y, as they are likely taking a page from what has made SHOP successful. Smaller-cap and turns a profit already. Believe BABA and others mentioned here support/invest in BZUN also.

With largest middle class on the planet, who are all heavy adopters of mobile, I think all the above companies will continue to do well. I just like BIDU and BZUN for upside. The risk is the obvious lack of visibility to info compared to US companies and the risk that China Govt can come in and do whatever they want at any point. I have seen the argument made that China also views these brands as critical to their image globally, and have a vested interest in ensuring these companies stay successful.

-Dreamer

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Hi Dreamer

There are equivalent business models but not equivalent in either market potential as you point out which vastly favours the Chinese players nor in terms of growth rates.

Equivalency would go like this:-

Ali Baba = EBay + PayPal + YouTube + Netflix + AWS + WholeFoods + XPO Logistics + pick a Hollywood movie Studio + XPO Logistics + pick a silicon valley unicorn investment fund

Tencent = Facebook/WhatsApp + Square + Spotify + Activision Blizzard + pick a Hollywood movie studio + pick a silicon valley unicorn investment fund

Baidu = Google + Netflix + Waymo + Alphabet’s AI big bets

JD.Com = Amazon + Walmart offline + online + XPO Logistics

Momo = Tinder

Weibo = Twitter

Baozun = Shopify (without the funky bells and whistles)

Ant
(I hold Ali Baba and Tencent and am planning to buy JD.Com)

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Oh and if America had bicycle sharing then throw that in for Ali Baba as well as GRUBHUB.
A

An easy way to invest in these Chinese internet companies is through etf KWEB. Top holdings are: Tencent (10%), BABA (9%), Baidu (7%), Vipshop (6%), JD (6%). BZUN also included. Another reason to invest in these companies right now is that some of them will probably list in China as CDR similar to ADR here. Chinese investors could bid them up to much higher prices.

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Kevin,
I was just about to post the same suggestion. I concluded that I knew very little on China, so I bought CQQQ (though KWEB seemed quite similar).

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I was just about to post the same suggestion. I concluded that I knew very little on China, so I bought CQQQ (though KWEB seemed quite similar).

doppelg36,

Yes, CQQQ is very similar to KWEB. The only thing is KWEB is much larger ($1.65B to CQQQ’s $465M). So it’s more liquid. But for a small investor like me, it’s not a problem.

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Kevin - I did look at KWEB, and it has all the names you want, but my issues was it also had 50% of fund in names I never heard of. Felt better just cherry-picking the individual stocks I could research more easily on my end. Just my take on it.

-Dreamer

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Call me old-fashioned but some weeks ago I came to the conclusion that the continual probing and evaluation of the defences of the Anglosphere and NATO, both in physical terms and for potential cyber-attack, as well as perpetual industrial espionage, massive arms build-ups and threats to weaker neighbors, made investing in China or Russia amount to aiding and abetting the enemy. Some part of my investing cash would aid these respective dictatorships. I found investing in US companies (and others) gave me a good feeling while investing in places where the Rule of Law is ‘more honoured in the breach than the observance’ did not. Apologies Saul, severely off-topic, desisting as of now!

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The Chinese internet giant topped earnings estimates early Thursday, but revenue growth came in a little light. Tencent, which had been 3% off a cup base buy point, sold off 3%. Tencent did hold above its 50-day line and the messaging and gaming titan could soon form a handle, creating a lower buy point. But buying now would simply recreate the same potential risk.

Long.

Hi NS, all!

Just an FYI that Naspers LTD, one of TCEHY’s oldest and largest investors, will be selling about $10.6B worth of shares…taking their holdings down from 33.2% to 31.2%. The entire TCEHY stake cost them $34M in 2001…what a profit! (Source:WSJ).

Cheers!
Murph
II and PP Home Fool
(long TCEHY in my “Mad Money”/non-core strategy portfolio, due to a son in the video gaming industry)
(also struggling with valuation on this one)

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BEIJING—Internet giant Tencent Holdings Ltd. TCEHY 6.73% blew past expectations on Wednesday, reporting a 61% increase in net profit in the first three months of the year on the strength of mobile games and other digital content, and its fast-growing mobile payments business…Tencent reported a net profit of 23.29 billion yuan ($3.65 billion) in the first quarter ended March 31, beating the 17.1 billion yuan estimate of analysts polled by S&P Global Market Intelligence. Revenue rose 48% to 73.53 billion yuan on year."

That’s nice :slight_smile:
Tencent is my only remaining Chinese stock (Baidu and Alibaba having been shed) (about 3% of portfolio value).

Picked them up during an Asian trip a couple of years ago
The Japanese outfits picked up included Fanuc, Omron, Softbank, Familymart and Seven & I Holdings. Omron and Familymart have been the standouts (up 107% and 176% respectively)
I also own some Jardine Matheson for a number of year which I picked up before I had confidence in picking my own Chinese stocks. It’s in the black, but underperforming, so it will probably get washed.

While Omron is an old school company making cool gadgets which fill technical niches (from the blood pressure meters you might find on the shelf at CVS to motor controllers used in robotics), the Familymart pick was simply based on seeing their market penetration of convenience stores in cities and towns spread across Asia (Japan, China, Taiwan, Thailand, etc., etc.), looking at their annual report and wondering why the stock price was so cheap.

They are more useful souvenirs than refrigerator magnets :slight_smile: I will be heading back to Asia later this year to see if I can find more cigar butts laying around.

As others have mentioned, the work done on this board is superb and I feel lucky to have come across it. Thank you all for your hard work.

Jeff

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Jeff - if you are passing through Singapore and you want to meet fool investors here (both from this board and Singapore Motley Fool), message me and or Jon on this board. Happy to swap ideas on cigar butts or anything else - maybe even over a whisky and cigar if that helps.

ps I hold plenty of SG and HK listed Asian and US listed Chinese stocks including Tencent, Ali Baba, Net Ease, YY, TAL Education Systems, CTrip that are US listed plus a bunch of local stuff from infrastructure plays like Beijing Capital Airport, China Aviation Oil, Kingsoft, Yangtze Optical Fibre And Cable, Net Dragon, Yanlord, Yangzijiang Shipbuilding, Ping An, China Taiping Insurance Holdings Company Limited, China Aircraft Leasing Group etc.

Ant

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Jeff - if you are passing through Singapore and you want to meet fool investors here (both from this board and Singapore Motley Fool), message me and or Jon on this board. Happy to swap ideas on cigar butts or anything else - maybe even over a whisky and cigar if that helps.

By all means, anybody passing through SG should give Ant or I a heads up.