China's Tencent sees WeChat usage surge on virus

Tencent's social media platform WeChat and videogames experienced a surge in traffic as China's government urged millions of people to stay at home and away from crowded places, analysts said. — Reuters

BEIJING: China's Tencent Holdings Ltd said on March 18 the coronavirus drove eight billion visits to its WeChat platform as users flocked to get "health codes" they need to show authorities in order to travel around the country.

Reporting slightly lower than expected fourth quarter profit on March 18, the gaming and social media giant said in a statement it did not expect the epidemic to have any significant impact on its financial position to date.

This is markedly different from many companies around the world which have downgraded earnings forecasts due to the virus.

It reported a 21.58bil yuan (RM13.39bil) profit for the three months through December. That compared with the 22.85bil yuan (RM14.18bil) average of 15 analyst estimates compiled by Refinitiv.

Revenue rose 25% to 105.8bil yuan (RM65.65bil), versus the 102.9bil yuan (RM63.85bil) average estimate of 17 analysts. That marked Tencent's fastest revenue growth since late 2018.

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.

Video streaming

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 began 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.

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.

Shares in Tencent closed 4.5% lower on Wednesday. Tencent's shares have fallen 11.1% so far this year as the coronavrius roiled global markets, versus a 21% decline in the Hang Seng index

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". – Reuters