Quarantined gamers set to boost Tencent earnings


  • Corporate News
  • Thursday, 19 Mar 2020

The Chinese technology major is likely to provide its first estimate on the impact of the epidemic on Wednesday when it reports October-December earnings, with analysts saying Tencent will be one of the biggest corporate winners

BEIJING: Tencent Holdings Ltd is set to give a glimpse of how the world’s largest gaming company has fared from the coronavirus outbreak after curbs forced millions to stay at home, driving up demand for online games and streaming services.

The Chinese technology major is likely to provide its first estimate on the impact of the epidemic on Wednesday when it reports October-December earnings, with analysts saying Tencent will be one of the biggest corporate winners.

Tencent’s businesses are mainly online-only, positioning it uniquely against other tech giants such as Alibaba Group Holding Ltd that focus on e-commerce and whose supply chains have been severely disrupted by the outbreak.

“Mobile games are one of the very few entertainment options during the coronavirus outbreak.

“Comparing the figures in early 2019, downloads of Tencent games increased by 10.4% year over year in this February, and revenue increased by 11.8%, ” said analyst Nan Lu at researcher Sensor Tower.

Overall, downloads of all Tencent apps for this February grew 32.3% month-on-month and 42.9% year-on-year, she said.

Tencent’s most popular games include Honour of Kings and Peacekeeper Elite. It also operates social media platform WeChat, a video streaming site and a news portal. Its services experienced a surge in traffic as China’s government urged millions of people to stay at home and away from crowded places, analysts said.

Well before the epidemic begun in China in late December, prospects were already starting to look up for the company after an especially difficult 2018, when it endured a lengthy freeze in the regulatory approval of new games that wiped billions of dollars off its market value.

Revenue for the three months through December likely rose at its highest rate since the end of 2018, by 21.2% to 102.9 billion yuan (US$14.69bil), showed Refinitiv data based on the estimates of 17 analysts.

A weak point in the January-March quarter, however, will likely be advertising – which made up nearly 20% of revenue in the third quarter – as companies cut back spending amid concerns over the virus’ economic fallout, analysts said.

Subsidiary Tencent Music Entertainment Group on Tuesday said it would likely see “much softer” first-quarter revenue growth as the outbreak was impacting licensing and advertising revenue.

On the flip side, analyst Kevin Tam at Core Pacific-Yamaichi Securities in Hong Kong wrote in a research note that Tencent could see margin improvement “as a result of stringent control on marketing expenses and higher profitability from video advertising.”Tencent’s shares have fallen 6.9% so far this year, versus a 17% decline in the Hang Seng index. — Reuters

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