HONG KONG: As tech megacaps around the world climb to new records, investors see a chance for Tencent Holdings Ltd shares to finally regain their former glory.
The Hong Kong-listed stock has added more than US$150bil in market value this year, yet it remains 26% below its all-time high. And it’s trading at a substantial discount to global tech peers from Meta Platforms Inc to Sony Group Corp.
Tencent has more than cheapness going for it, with earnings estimates higher than ever ahead of the company’s results due soon, and big expectations for game titles including Valorant Mobile. So, how close might the shares be to a new peak?
“It’s just a matter of time,” said Jian Shi Cortesi, a fund manager at Gam Investment Management, which has Tencent as the largest holding in its flagship fund.
“The ubiquity of WeChat will make Tencent a long-term winner in eCommerce, and its stock valuations are reasonable on historical and peer comparisons.”
Tencent still hasn’t erased the hit from China’s corporate crackdowns, which drove its stock to a five-year low in 2022. It hasn’t benefited as much as peers such as Alibaba Group Holding Ltd from this year’s artificial intelligence (AI) boom, nor has it suffered from extreme competition like Meituan.
Shares of Tencent are trading at 17.6 times estimated forward earnings, below their five-year average of 20 times. Meta and Sony are both at around 22 times while Japanese video game company Nintendo Co trades at nearly 40 times – all three of those reached new record share prices last week.
“I have no doubt that Tencent will return to historical levels,” said Morningstar Inc analyst Ivan Su.
“The market still isn’t factoring in how much AI will help the company’s advertising and gaming businesses, but I think those earnings revisions will eventually come through”. — Bloomberg
