Tencent's magic goes on

Updated: 2015-01-08 05:58

By Celia Chen in Hong Kong(HK Edition)

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Lauded by some of the top investment banks, the Hong Kong-listed H shares of Chinese IT giant Tencent Holdings soared about 10 percent in the last three trading days to close at HK$124.4 ($16) apiece on Wednesday.

The company, which operates one of the most popular messaging platforms on the Chinese mainland, captured investors' imagination by opening the mainland's first online bank, WeBank, at its home base in Shenzhen.

Blessed by Premier Li Keqiang, who attended WeBank's opening ceremony last weekend, online banking has become one of the hottest investment themes in the mainland capital market. Speaking at the ceremony, Li said: "It is one small step for WeBank, one giant step for financial reform."

The establishment of WeBank is widely seen as a breakthrough in the mainland government's efforts to broaden the funding channel for the many cash-strapped small- to medium-sized enterprises. "We will lower costs for and deliver practical benefits to small clients, while forcing traditional financial institutions to accelerate reforms," Li said.

What's more, the central bank has given a Tencent unit the green light to provide consumer credit information together with several other information technology companies, including Alibaba's Sesame Credit Management. The service is expected to be launched in six months.

Tencent's magic goes on

The company's foray into the finance business has obviously made it a darling of stock analysts and fund managers.

Reaffirming a "buy" rating, Deutsche Bank projected the share price of Tencent to reach HK$155.5. It predicted that Tencent's new banking venture will lay a solid foundation for its future development.

Meanwhile, JPMorgan Chase raised its target price of Tencent to HK$160 - nearly 30 percent higher than its Wednesday closing price. Banking aside, JPMorgan said it expected Tencent's growth in advertising revenue in 2015 will greatly boost its profit.

Advertising revenue at Tencent, whose free WeChat and QQ messaging applications are among mainland's most popular platforms, is widely expected to double by 2017, according to a JPMorgan report.

The bank predicted that projected advertising revenue will replace the declining gaming sales to be Tencent's major source of profit in two to three years.

Credit Suisse gave Tencent an "overweight" rating and raised the target price of the company's H shares to HK$150.

Tencent reported its revenues increased by 28 percent year-on-year to 19.8 billion yuan ($3.2 billion) in the third quarter of last year. Revenues from value-added service business advanced 38 percent year-on-year to 16 billion yuan, primarily driven by growth in revenues from video advertising and mobile advertising.

Revenues from online advertising business jumped 76 percent year-on-year to 2.4 billion yuan, mainly driven by growth in revenues from video advertising and mobile advertising.


(HK Edition 01/08/2015 page8)