EXAMPLE THE SUM PARTS OF MULTI FIRMS

20 July 2016
Asia Pacific/China
Equity Research
Consumer Internet
Tencent Holdings
(0700.HK / 700 HK)
Rating
OUTPERFORM*
Price (18 Jul 16, HK$)
185.00
Target price (HK$)
(from 190.00) 230.00¹
Upside/downside (%)
24.3
Mkt cap (HK$ mn) 1,740,423 (US$ 224,452)
Enterprise value (Rmb mn)
1,487,974
Number of shares (mn)
9,407.69
Free float (%)
50.8
52-week price range
185.0 - 125.0
ADTO - 6M (US$ mn)
365.7
*Stock ratings are relative to the coverage universe in each
analyst's or each team's respective sector.
¹Target price is for 12 months.
Research Analysts
Evan Zhou
852 2101 6745
[email protected]
Zoe Zhao
852 2101 7201
[email protected]
ASSUMING COVERAGE
The Penguin Empire: Rock solid
■ Assuming coverage with an OUTPERFORM rating and a target price of
HK$230 implying 24% upside. Tencent has been an all-around platform
leader in almost all sub-segments: ads, games, fin-tech and portfolio of
investments. We expect solid topline delivery and a favourable mix shift to
ads to drive gradual margin expansion. Value creation from the maturing
star portfolio companies of Didi, CIP, Supercell, WeBank, etc., would also
continue to provide catalysts to the share price in the next 2-3 years.
■ Performance-based ad: on an open-ended runway. The key growth story
of Tencent is the rise in ad contribution, especially from performance-based
native ads. With the gradual opening-up of inventories on Moments, public
accounts and upgrade of self-service ad systems, Tencent's performancebased ad is expected to witness a CAGR of 79% over 2015-18.
■ Games, leading global franchise on PC and mobile. Tencent owns the
most comprehensive portfolio of PC and mobile titles of various genres both
in China and overseas. Recent mobile gaming regulations are likely to slow
down releases from small studios which should benefit leading players like
Tencent in gaining additional market share; Supercell's value-add to
Tencent's stock would come mainly from dividend yield contribution to net
profit. We expect PC/ mobile games to witness a three-year CAGR of 8% /
33% over 2015-18.
■ Valuation and TP. Our TP of HK$230, implying 33.4x 2017E dil. adj. P/E,
includes: (1) internet finance business' valuation of HK$24.20/sh, and (2)
core business valuation of HK$205.8/sh, based on 30x 2017E P/E. We see
Tencent's dominance has positioned it on a parallel footing with other global
internet giants. Risks: macro and regulation headwind for ads; high base of
mobile games, and faster-than-expected slowdown in key PC titles.
Share price performance
200
Price (LHS)
Rebased Rel (RHS)
180
150
130
100
Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16
80
The price relative chart measures performance against the
MSCI CHINA F IDX which closed at 5901.51 on 18/07/16
On 18/07/16 the spot exchange rate was HK$7.75/US$1
Performance over
Absolute (%)
Relative (%)
1M 3M 12M
9.5 11.6 20.4
2.5 12.7 37.4
—
—
Financial and valuation metrics
Year
Revenue (Rmb mn)
EBITDA (Rmb mn)
EBIT (Rmb mn)
Net profit (Rmb mn)
EPS (CS adj.) (Rmb)
Change from previous EPS (%)
Consensus EPS (Rmb)
EPS growth (%)
P/E (x)
Dividend yield (%)
EV/EBITDA (x)
P/B (x)
ROE (%)
Net debt/equity (%)
12/15A
102,863.0
44,261.3
36,414.0
32,002.0
3.40
n.a.
n.a.
31.6
47.0
0
33.5
12.5
32.0
Net cash
12/16E
143,294.2
62,656.4
51,234.6
44,358.0
4.68
0.8
4.38
37.5
34.1
0
23.7
9.9
32.6
Net cash
12/17E
177,415.6
77,196.4
64,340.3
57,015.4
6.01
3.3
5.58
28.5
26.6
0
18.7
7.5
32.2
Net cash
12/18E
221,915.8
99,348.0
84,853.4
74,684.6
7.88
7.00
31.0
20.3
0
13.9
5.6
31.7
Net cash
Source: Company data, Thomson Reuters, Credit Suisse estimates.
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse
does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as
only a single factor in making their investment decision.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS
BEYOND INFORMATION®
Client-Driven Solutions, Insights, and Access
20 July 2016
Focus charts and tables
Figure 1: Solid WeChat MAU growth—the foundation of all
1200
45%
40%
1000
35%
800
30%
Figure 2: Ad revenue comparison of leading SNS players
6,000
3.00
2.83
5,000
2.50
4,000
2.00
2.00
25%
600
20%
400
15%
3,000
1.50
2,000
1.00
10%
200
5%
0
0%
0.59
1,000
0.41
0
0.50
-
Facebook Twitter
WeChat and Weixin MAU (mn)
0.55
Tencent
Ad Rev (US$ mn)
YoY %
WB
LINE
Ad Rev /MAU (US$)
Source: Company data, Credit Suisse estimates
Source: Company data, Credit Suisse estimates
Figure 3: Mobile game ranking (by grossing)
Figure 4: China mobile payment market share in 1Q16
Name
Jan16 Feb16 Mar16 Apr16 May16 Jun16
JX Mobile
Wang zhe rong yao
Zhengtu
Quan min feiji da zhan
CrossFire
KoF 98
Naruto Mobile
Tian tian ku pao
Dragonball Z mobile
Re xue chuan qi
Tian tian ai xiao chu
Huan le dou di zhu
5
5
4
3
10
6
9
4
27
4
6
9
8
24
7
5
11
6
23
3
18
20
3
16
21
8
20
22
6
8
12
9
21
7
4
22
24
3
5
9
11
17
6
21
13
10
26
29
2
4
5
7
9
11
14
19
24
25
27
30
Source: Thinkgaming
Umpay PinganpayOthers
1.3%
1.2% 4.7%
Lianlianpay
1.3%
Lakala
1.4%
Alipay
51.8%
Tenpay
38.3%
Source: iResearch
Figure 5: Global internet leaders comps table*
Mkt cap
Company
PE
Ticker
Ccy
Price
Rating
(US$ mn)
2016E
2017E
Tencent
0700.HK
HKD
185.0
O
224,435
33.8
26.3
Baidu
BIDU.US
USD
164.8
O
57,059
35.7
23.4
Alibaba
BABA.US
USD
82.7
O
207,652
33.1
25.8
Facebook
Google
Netflix
Average
FB.US
USD
119.4
O
341,435
33.3
24.5
GOOGL.US
USD
753.2
O
510,444
23.6
19.1
NFLX.US
USD
98.8
N
42,320
195.0
71.3
59.1
31.7
Source: Company data, Bloomberg, Credit Suisse estimates. *Closing price of 18 Jul 2016.
Tencent Holdings
(0700.HK / 700 HK)
2
20 July 2016
The Penguin Empire: Rock solid
As one of the best performers in the China internet space year-to-date, Tencent has been
an all-around platform winner in almost all sub-segments: ads, games, internet finance
and portfolio of investments. This has been supported by (1) a clear strategy of platform
positioning, (2) excellent user product design and operations, (3) forward-looking strategic
investment and industry cooperation, and (4) a seasoned management to balance internal
execution and market expectation. We expect solid topline delivery and a favourable mix
shift to ads to drive gradual margin expansion. Value creation from maturing star portfolio
companies of Didi, CIP, Supercell, JD, WUBA, WeBank, etc., would also continue to
provide catalysts to the share price in the next 2-3 years.
Performance-based ad: On an open-ended runway
The key growth story of Tencent is the rise of advertising contribution, especially from
performance-based native ads. With the gradual opening-up of advertisement inventories
on Moments, public accounts and upgrades of self-service ad systems, Tencent's
performance-based ads are expected to witness a CAGR of 79% over 2015-2018E. This
growth and leverage on expenses would also translate into 44 bp/188 bp of Tencent's net
margin expansion in 2017E/18E. Efforts to strike a balance between user experience and
monetisation pace might often create visibility concerns on its near-term performance.
Games: Leading global franchise on PC and mobile
Tencent owns the most comprehensive portfolio of PC and mobile titles of various genres
both in China and overseas markets. We breakdown Tencent's games segments by major
game titles to analyse the robustness of the portfolio, from referencing game ranks and
industry channel checks. We estimate top 5 PC titles account for 65% of total PC gaming
revenue and top 5 mobile titles account for 75% of total mobile gaming revenue, which we
believe is a healthy level. Recent mobile gaming regulations are likely to slow down
releases from small studios which should benefit leading players like Tencent in gaining
additional market share. Assuming the run-rate of Supercell's top games remains at the
current level, we expect limited contribution to VAS from Tencent's potential publishing
cooperation in 2017E. Supercell's value-add to Tencent's stock would come mainly from
dividend income contribution to net profit.
Investments: Bearing fruits for future
Tencent's investment track record has been enriching its service offerings, refueling
growth of its core user products, and winning good credit from investor community for
management's forward-looking industry insights. Although most investors have not
explicitly attributed value to many of Tencent's portfolio assets, we believe upcoming
value-unlock events from key assets, especially in eCommerce, O2O and finance, would
provide waves of value creation in the coming years. Inclusion of Supercell in the form of
dividend payout would also add another layer of optional value for shareholders.
Valuation and risks
We keep P/E as our main valuation methodology, as we see Tencent's strong earnings
power and cash flow are a testimony to the success of its franchise platform business
model. Our TP of HK$230 implies 33.4x FY17E adj. P/E. This includes (1) internet finance
business' valuation of HK$24.20/sh, and (2) core business valuation of HK$205.8/sh
based on 30x FY17E P/E. We see Tencent's dominance has put it on a parallel footing
with other global giants. We also performed a SOTP analysis as a reference for future
value creation from its investment portfolio, especially for payment. Downside risks
include: macro and regulation headwind for ads; high base of mobile games, and fasterthan-expected slowdown in key PC titles.
Tencent Holdings
(0700.HK / 700 HK)
3
20 July 2016
Tencent Holdings 0700.HK / 700 HK
Price (18 Jul 16): HK$185.00, Rating:: OUTPERFORM, Target Price: HK$230.00, Analyst: Evan Zhou
Target price scenario
Scenario
Upside
Central Case
Downside
TP
230.00
Income statement (Rmb mn)
Sales revenue
Cost of goods sold
SG&A
Other operating exp./(inc.)
EBITDA
Depreciation & amortisation
EBIT
Net interest expense/(inc.)
Non-operating inc./(exp.)
Associates/JV
Recurring PBT
Exceptionals/extraordinaries
Taxes
Profit after tax
Other after tax income
Minority interests
Preferred dividends
Reported net profit
Analyst adjustments
Net profit (Credit Suisse)
Cash flow (Rmb mn)
EBIT
Net interest
Tax paid
Working capital
Other cash & non-cash items
Operating cash flow
Capex
Free cash flow to the firm
Disposals of fixed assets
Acquisitions
Divestments
Associate investments
Other investment/(outflows)
Investing cash flow
Equity raised
Dividends paid
Net borrowings
Other financing cash flow
Financing cash flow
Total cash flow
Adjustments
Net change in cash
Balance sheet (Rmb mn)
Cash & cash equivalents
Current receivables
Inventories
Other current assets
Current assets
Property, plant & equip.
Investments
Intangibles
Other non-current assets
Total assets
Accounts payable
Short-term debt
Current provisions
Other current liabilities
Current liabilities
Long-term debt
Non-current provisions
Other non-current liab.
Total liabilities
Shareholders' equity
Minority interests
Total liabilities & equity
%Up/Dwn Assumptions
40% CAGR for gross profit from 13-15E
24.32 28.9% CAGR for gross profit from 13-15E
15% CAGR for gross profit from 13-15E
12/15A
102,863
41,631
24,818
(7,847)
44,261
7,847
36,414
(709)
1,886
(2,793)
36,216
—
7,108
29,108
—
302.0
—
28,806
3,196
32,002
12/15A
36,414
(198)
(7,108)
14,556
10,676
54,340
(6,844)
47,496
—
—
—
—
(56,598)
(63,442)
11,243
(2.6)
27,693
(1,375)
37,558
28,456
—
28,456
12/15A
81,967
7,061
222.0
66,128
155,378
9,973
105,054
—
36,413
306,818
15,700
11,429
—
97,277
124,406
50,014
—
12,363
186,783
120,035
—
306,818
12/16E
143,294
60,360
31,699
(11,422)
62,656
11,422
51,235
(771)
2,024
(4,356)
49,674
—
10,499
39,175
—
340.0
—
38,835
5,523
44,358
12/16E
51,235
(1,561)
(10,499)
(20,644)
14,850
33,381
(10,378)
23,003
—
—
—
—
(17,485)
(27,863)
(2,524)
(2.6)
6,618
(7,998)
(3,907)
1,612
—
1,612
12/16E
83,579
8,750
—
74,798
167,126
13,085
108,040
—
46,756
335,007
24,142
12,373
—
78,328
114,843
55,688
—
12,222
182,753
152,254
—
335,007
12/17E
177,416
74,020
39,056
(12,856)
77,196
12,856
64,340
(1,846)
2,024
(4,356)
63,854
—
13,416
50,438
—
340.0
—
50,098
6,918
57,015
12/17E
64,340
(486)
(13,416)
4,680
16,970
72,087
(12,749)
59,338
—
—
—
—
(9,440)
(22,189)
942
(2.6)
—
(5,347)
(4,408)
45,490
—
45,490
12/17E
129,069
10,874
—
92,864
232,807
18,062
112,396
—
46,756
410,021
29,991
12,373
—
97,349
139,713
55,688
—
12,222
207,623
202,398
—
410,021
12/18E
221,916
89,625
47,437
(14,495)
99,348
14,495
84,853
(2,526)
2,024
(4,356)
85,048
—
17,764
67,284
—
340.0
—
66,944
7,740
74,685
12/18E
84,853
194
(17,764)
1,845
19,431
88,560
(15,554)
73,006
—
—
—
—
(9,440)
(24,994)
990
(2.6)
—
(7,032)
(6,044)
57,522
—
57,522
12/18E
186,591
13,294
—
116,004
315,889
24,205
116,752
—
46,756
503,602
35,739
12,373
—
119,006
167,118
55,688
—
12,222
235,028
268,574
—
503,602
Key earnings drivers
Number of Premium QQ
subscription (Mn)
Per share data
Shares (wtd avg.) (mn)
EPS (Credit Suisse)
(Rmb)
DPS
(Rmb)
BVPS (Rmb)
Operating CFPS (Rmb)
Key ratios and
valuation
Growth(%)
Sales revenue
EBIT
Net profit
EPS
Margins (%)
EBITDA
EBIT
Pre-tax profit
Net profit
Valuation metrics (x)
P/E
P/B
Dividend yield (%)
P/CF
EV/sales
EV/EBITDA
EV/EBIT
ROE analysis (%)
ROE
ROIC
Asset turnover (x)
Interest burden (x)
Tax burden (x)
Financial leverage (x)
Credit ratios
Net debt/equity (%)
Net debt/EBITDA (x)
Interest cover (x)
12/15A
47.5
—
—
—
—
12/15A
9,402
3.40
0.0003
12.8
5.8
12/15A
12/16E
60.0
—
—
—
—
12/16E
9,478
4.68
0.0003
16.1
3.5
12/16E
12/17E
75.0
—
—
—
—
12/17E
9,480
6.01
0.0003
21.3
7.6
12/17E
12/18E
78.8
—
—
—
—
12/18E
9,479
7.88
0.0003
28.3
9.3
12/18E
30.3
39.5
32.1
31.6
39.3
40.7
38.6
37.5
23.8
25.6
28.5
28.5
25.1
31.9
31.0
31.0
43.0
35.4
35.2
31.1
43.7
35.8
34.7
31.0
43.5
36.3
36.0
32.1
44.8
38.2
38.3
33.7
47.0
12.5
—
27.7
14.4
33.5
40.7
34.1
9.9
—
45.4
10.4
23.7
29.0
26.6
7.5
—
21.0
8.1
18.7
22.4
20.3
5.6
—
17.1
6.2
13.9
16.3
32.0
36.6
0.34
0.99
0.80
2.56
32.6
34.2
0.43
0.97
0.79
2.20
32.2
36.5
0.43
0.99
0.79
2.03
31.7
46.1
0.44
1.00
0.79
1.88
(17.1)
(0.46)
(51.4)
(10.2)
(0.25)
(66.4)
(30.1)
(0.79)
(34.9)
(44.1)
(1.19)
(33.6)
Source: Company data, Thomson Reuters, Credit Suisse estimates.
12MF P/E multiple
45
40
35
30
25
20
15
10
5
0
2011
2012
2013
2014
2015
2016
2015
2016
12MF P/B multiple
14
12
10
8
6
4
2
0
2011
2012
2013
2014
Source: IBES
Tencent Holdings
(0700.HK / 700 HK)
4
20 July 2016
Performance-based ad: On an openended runway
Figure 6: Tencent's online ad revenue growth
(Rmb mn)
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16E
3Q16E
4Q16E
1Q17E
2Q17E
3Q17E
4Q17E
Online ad
2,724
4,073
4,938
5,733
4,701
7,453
8,969
9,941
8,230
12,300
14,085
15,364
606
818
1,300
1,176
840
2,057
1,720
832
2,386
1,997
820
2,916
1,515
654
2,532
2,568
915
3,970
3,132
1,098
4,738
3,195
1,318
5,428
2,364
1,055
4,811
4,138
1,192
6,970
4,965
1,346
7,774
5,213
1,481
8,670
131%
150%
88%
160%
97%
100%
8%
194%
102%
150%
-2%
165%
118%
73%
150% 150%
13% -20%
165%
95%
83%
104%
28%
89%
82%
92%
20%
99%
73%
97%
10%
86%
75%
72%
32%
90%
65%
61%
30%
76%
57%
59%
23%
64%
55%
63%
12%
60%
-Video
-Non-Video Portal
-Performance-based ad
YoY %
Online ad
-Video
-Non-Video Portal
-Performance-based ad
Source: Company data, Credit Suisse estimates
Although China's online advertising is facing macro headwinds, Tencent's online ad
business can hedge better compared with its peers, mainly due to its strong social SNS
(social networking service) feature. We expect Tencent's total online ad revenue could
reach Rmb31.1 bn in 2016E, up 78% YoY, mainly driven by performance-based native ad
on its core mobile apps QQ, WeChat, Qzone, Tencent News, etc.
We forecast performance-based ad revenue to grow 91% YoY to Rmb16.7 bn in 2016,
accounting for 54% of total online ad revenue (vs. 50% in 2015). We expect this trend will
continue and the revenue contribution will likely increase to 62% in 2018.
We expect Tencent's total
online ad revenue could
reach Rmb31.1 bn in
2016E, up 78% YoY, mainly
driven by performancebased native ad on its core
mobile apps QQ, WeChat,
Qzone, Tencent News, etc.
Figure 7: Contribution from performance based ad to keep rising
100%
90%
80%
39%
50%
54%
56%
20%
13%
10%
30%
30%
33%
33%
31%
2014
2015
2016E
2017E
2018E
70%
62%
60%
50%
40%
32%
7%
30%
20%
10%
0%
Video
Non-Video Portal
Performance-based ad
Source: Company data, Credit Suisse estimates
Tencent Holdings
(0700.HK / 700 HK)
5
20 July 2016
Figure 8: Improving GPM of online ad due to increasing mix from native ad
70%
60%
50%
44%
40%
50%
49%
60%
55%
30%
20%
10%
0%
2014
2015
2016E
2017E
2018E
GPM % of online ad
Source: Company data, Credit Suisse estimates
As the margin for performance-based ad is higher than overall brand ad, the increasing
contribution from performance-based ad would also translate into gradual margin
improvement over the next two to three years. We estimate GPM of online ad business to
rise to 60% in 2018.
WeChat ads: managed pace of monetisation
Figure 9: Solid growth in performance-based ad revenue
60,000
As margin for performancebased ad is higher than
overall brand ad, increasing
contribution from
performance-based ad
would help improve the
overall margin.
200%
180%
50,000
160%
140%
40,000
120%
30,000
100%
80%
20,000
60%
40%
10,000
20%
-
0%
2014
2015
2016E
Performance base ad (Rmb mn)
2017E
2018E
YoY%
Source: Company data, Credit Suisse estimates
We believe the growth in performance-based revenue mainly comes from improving
advertiser inventory, fill rate/ad load, and CPC (cost per click)/eCPM improvement. So far,
majority of this is contributed by Qzone advertisements currently (70-80%), as it is most
advanced in monetisation which started 2.5 years ago and Qzone has 1 in six or
seven feeds in 24 hours. Some of the successful marketing examples include: (1)
meguo.com receiving over 100 mn daily views and 200+ effective ads, (2) Mogujie.com
launched an official Qzone space, attracting 20 mn fans, and 1 mn PVs.
Tencent Holdings
(0700.HK / 700 HK)
6
20 July 2016
Figure 10: Tencent's performance-based native ad revenue
10,000
9,000
Rmb mn
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16E 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E
Total performance ad rev
Wechat ad
Qzone mobile
Qzone PC
Source: Company data, Credit Suisse estimates
In addition, Tencent has also integrated WeChat Official Account and WeChat Moment
ads into the GDT (Guangdiantong, Tencent's performance-based ad platform to
advertisers) engines, which would improve advertisers' experience and increase product
offerings and inventory base. Tencent began to test water in launching ad in WeChat
Official Account in July 2014 and Moment starting in early 2015.
Figure 11: Growth of WeChat MAU
1200
45%
40%
1000
35%
800
30%
25%
600
20%
400
15%
10%
200
5%
0
0%
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16E 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E
WeChat and Weixin MAU (mn)
YoY %
Source: Company data, Credit Suisse estimates
WeChat, launched in 2011, expanded rapidly benefiting from the traffic transfer from QQ's
large user base and mobile migration. As of end-2015, WeChat MAUs (monthly active
users) were 697mn, up 39% from 2014. We believe WeChat MAU will maintain decent
growth in 2016 too. WeChat is one of the most successful products post QQ, and now is
becoming most-often-used SNS app between friends, family and is even quite
popular occupationally.
Tencent Holdings
(0700.HK / 700 HK)
7
20 July 2016
Figure 12: CS forecast of WeChat ad revenue
WeChat MAU (Mn)
WeChat DAU (mn)
Effective Daily refresh of Moments:
Ads per refresh
CPC (Rmb)
CTR
eCPM (Rmb)
Revenue per 1,000 refresh (Rmb)
Net take rate
Net Revenue (Rmb, mn)
1Q15
549.4
2Q15
600.0
3Q15
649.5
4Q15
697.0
1Q16
762.0
2Q16
800.1
3Q16
832.1
384.6
1.4
0.2
0.4
4.0%
17.2
3.4
70%
116.7
420.0
2.4
0.4
0.5
4.0%
20.0
8.0
70%
508.0
454.7
2.4
0.4
0.5
4.0%
21.2
8.5
70%
582.9
487.9
2.4
0.6
0.5
4.0%
21.2
12.7
70%
938.4
533.4 560.1
2.4
2.8
0.7
0.8
0.5
0.6
3.5%
3.0%
18.6
17.1
12.1
14.4
70%
70%
972.4 1,419.1
582.5
3.6
0.9
0.6
2.8%
16.5
14.9
70%
1,964.1
4Q16
865.4
1Q17
908.7
2Q17
945.0
3Q17
978.1
4Q17
1,007.4
605.8 636.1 661.5 684.7
4.4
3.5
4.5
4.5
1.1
1.0
1.6
1.7
0.6
0.6
0.6
0.6
2.5%
2.1%
2.1%
2.1%
15.0
12.8
13.0
13.4
15.8
12.8
21.1
23.0
70%
70%
70%
70%
2,644.7 1,796.6 3,955.5 4,460.8
705.2
4.5
1.8
0.7
2.1%
13.7
24.6
70%
4,912.1
Source: Company data, Credit Suisse estimates
So far, Tencent is controlling ad loads in Moment carefully to balance with user experience.
Moment has one in ten user feed, or one ad per 48 hours. In the 1Q16 earnings call,
the company noted there will not be a very fast release of ad inventories going forward,
considering it as a long-term business. That said, we still expect WeChat ads have large
potential in the long term, and will grow from Rmb2.1 bn in 2015 to Rmb7.0 bn in 2016 and
Rmb15.1 bn in 2017. Overall, we believe performance-based native ad as an open-ended
runway, and as a long-term growth driver for Tencent.
We expect WeChat ads to
have large potential in the
long term, and will grow
from Rmb2.1 bn in 2015 to
Rmb7.0 bn in 2016 and
Rmb15.1 bn in 2017.
Figure 13: WeChat Moment ad sample
Figure 14: Qzone mobile performance-based ad sample
Source: Company data
Source: Company data
Tencent Holdings
(0700.HK / 700 HK)
8
20 July 2016
Peer comparisons
Figure 15: Global comparison of SNS players
6,000
3.00
2.83
5,000
2.50
4,000
2.00
2.00
3,000
1.50
2,000
1.00
0.59
1,000
0.55
0.41
0
0.50
-
Facebook
Twitter
Tencent
WB
Ad Rev (US$ mn)
LINE
Ad Rev /MAU (US$)
Source: Company data, revenue and MAU based on 4Q15 numbers, Credit Suisse estimates
Ad revenue of Tencent is still small compared with global leading players such as
Facebook. In 4Q15, Tencent's ad revenue was US$882 mn, only one-sixth of Facebook's
ad revenue of US$5.6 bn.
In addition, we use quarterly advertising revenue/ MAU ratio to measure the monetisation
level of those peers. The monetisation rate for domestic SNS players is still low, with
US$0.55 for WB and US$0.59 for Tencent, while it's US$2.83, US$2.00 and US$0.41 for
Facebook, Twitter and LINE. We believe there's still great room for further monetisation
upside for Tencent.
Figure 16: Comparison of leading domestic performance-based ad players
7,000
The monetisation rate for
domestic SNS players is still
low compared with global
leading players. We believe
there's still great room for
further monetisation upside
for Tencent.
Rmb mn
6,000
5,000
4,000
3,000
2,000
1,000
0
Toutiao
WeChat
Weibo
2014
2015
NTES news
Sohu news
2016
Source: Company data, Credit Suisse estimates
Both SNS players and news apps are the main platforms for in-feed ads. Toutiao (Today's
Headline, 今日头条) is one of the most popular news apps in China. It was launched in
2012, and its MAU crossed 125 mn recently. According to ZOL news, Toutiao's ad
revenue was about Rmb3 bn in 2015 and it targets revenue of Rmb6 bn in 2016 (up 100%
YoY+). In addition, we expect WeChat and Weibo's ad revenue to also grow rapidly due to
popularity of the in-feeds ad formats.
Tencent Holdings
(0700.HK / 700 HK)
9
20 July 2016
Games: Leading global franchise on
PC and mobile
Figure 17: Online game revenue breakdown
(Rmb mn)
1Q15
13,313
2Q15
12,970
-QQ Game Platform
-Advanced Casual Games
-MMOG Games
-Mobile Game
YoY %
Online game revenue
174
7,789
2,707
2,644
151
7,439
2,672
2,708
28%
17%
-QQ Game Platform
-Advanced Casual Games
-MMOG Games
-Mobile Game
-52%
25%
-1%
151%
-27%
15%
1%
55%
Online game revenue
3Q15 4Q15
14,333 15,971
1Q16
17,085
2Q16E
16,948
3Q16E
17,628
4Q16E
18,107
1Q17E
18,895
2Q17E
19,082
3Q17E
19,813
4Q17E
20,416
416
8,123
3,180
4,253
319
8,478
3,364
4,924
724
8,215
2,985
5,023
702
8,445
3,146
5,336
681
8,675
3,149
5,602
660
8,829
3,248
6,157
641
8,979
3,142
6,319
621
9,285
3,272
6,635
603
9,577
3,269
6,967
27%
33%
28%
31%
23%
13%
11%
13%
12%
13%
161%
10%
13%
114%
269%
16%
24%
86%
83%
9%
24%
86%
156%
12%
13%
86%
16%
11%
7%
68%
-3%
10%
1%
31%
-11%
8%
0%
25%
-11%
9%
5%
26%
-11%
10%
4%
24%
-11%
10%
4%
24%
381
7,762
3,009
3,181
Source: Company data, Credit Suisse estimates
We see a solid outlook for Tencent's online gaming business. We expect Tencent's online
gaming revenue to reach Rmb69.8 bn in 2016, up 23%. Mobile game is still the growth
driver and we forecast it to grow 63% to Rmb20.9 bn in 2016.
We expect online game
revenue to reach Rmb70 bn
in 2016, up 23%, driven by
mobile game growth.
Figure 18: Revenue contribution of key game titles—diversification through mobile portfolio
60,000
Rmb mn
Mobile game revenue ramps
up since 2014
50,000
40,000
30,000
20,000
10,000
2011
2012
2013
2014
2015
League of Legends
Dungeon & Fighter
Cross Fire
Blade & Soul
T-Game
Call Of Duty OL
Other PC
Wang zhe rong yao
Zhengtu
Naruto Mobile
Quan min fei ji da zhan
Re xue chuan qi
CrossFire
Dragonball Z mobile
KoF 98
Tian tian ku pao
Tian tian ai xiao chu
Other mobile
Source: Company data, Credit Suisse estimates
Before 2014, majority of online gaming revenues came from PC games. The key PC titles
included League of Legends, Dungeon & Fighter, Cross Fire, T-Game, etc. We estimate
top 5 PC titles contribute 65% of total PC revenue.
Mobile gaming revenue began to ramp up in 2014. "Quan min fei ji da zhan" was among
the first batch of mobile games operating on WeChat. Then Tencent launched the
"Tiantian series" including "Tiantian ku pao", "Tian tian ai xiao chu" and other casual
games. With improving technology for mobile games and increasing penetration of largescreen smartphones, mid & hard-core games (mainly MMORGP genre) are becoming
more popular and are now the main contributor of Tencent's mobile gaming revenue.
Tencent Holdings
(0700.HK / 700 HK)
10
20 July 2016
According to our estimates, the top 5 mobile titles account for 75% of total mobile game
revenue in 2015.
Figure 19: Blended margin trend for online games
68%
67%
66%
64%
63%
62%
60%
59%
58%
58%
57%
56%
54%
52%
2014
2015
2016E
2017E
2018E
GPM % of online game
Source: Company data, Credit Suisse estimates
We estimate the overall GPM for online games will gradually trend down mainly due to the
increasing revenue mix from mobile games. So far, the sector GPM for PC games is over
70% while GPM for mobile games is lower at around 50%.
Solid growth of mobile gaming portfolio
Figure 20: Growth of total mobile game revenue
60,000
We estimate the overall
GPM for online games will
gradually trend down mainly
due to the increasing
revenue mix from mobile
games.
100%
90%
50,000
80%
70%
40,000
60%
30,000
50%
40%
20,000
30%
20%
10,000
10%
-
0%
2014
2015
2016E
Mobile game revenue (Rmb mn)
2017E
2018E
YoY %
Source: Company data, Credit Suisse estimates
Mobile games have been growing rapidly during the past two years, since their ramp up in
2014. With the increasing large base and fewer big PC titles untapped, we expect the
growth of mobile games will gradually cool down in the next few years, likely to ~16%
in 2018.
In 2Q16, as of end of Apr/ May/ Jun, Tencent had 10/11/12 titles in the Top 30 in terms of
grossing. Tencent is still the player with most titles, followed by NetEase with four. In
addition, Tencent has five titles in Top 10.
Tencent Holdings
(0700.HK / 700 HK)
11
20 July 2016
Figure 21: Grossing ranking of Tencent's mobile games—Tencent accounts for 40-50% of top 30
Name
中文名称
JX Mobile
Wang zhe rong yao
Zhengtu
Quan min fei ji da zhan
CrossFire
KoF 98
Naruto Mobile
Tian tian ku pao
Dragonball Z mobile
Re xue chuan qi
Tian tian ai xiao chu
Huan le dou di zhu
剑侠情缘
王者荣耀
征途
全民飞机
穿越火线
拳皇 98
火影忍者
天天酷跑
龙珠激斗
热血传奇
天天爱消除
欢乐斗地主
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
7
6
5
5
4
3
5
6
8
13
5
16
21
10
6
9
4
27
4
6
9
8
24
7
5
11
6
23
3
17
15
3
18
19
3
18
20
3
16
21
8
20
22
6
8
12
9
21
7
4
22
24
3
5
9
11
17
6
21
13
10
26
29
2
4
5
7
9
11
14
19
24
25
27
30
Source: Thinkgaming
According to iResearch, Tencent accounted for over 40% of the mobile gaming market
share in 2015. Its strong distribution capabilities also help attract cooperation with more
successful CPs. The mid and hard core games from successful PC IPs will continue to be
the promising titles, including Zhengtu (Giant Interactive), Classic TLBB (Changyou), JX
Mobile (Kingsoft/Westhouse) and others.
Expect market share expansion from more stringent regulation
On 30 June 2016, Apple announced that approval from the State Administration of Press,
Publication, Radio, Film and Television of The People's Republic of China (SARFT) is a
must for mobile games to publish on iOS platform. SARFT issued a notice on 24 May to
strengthen the regulation on mobile game distribution. The regulation states that all mobile
games need to be reviewed and approved by SARFT.
We believe the new regulation likely puts more pressure on small CPs or individual
developers of mobile games. As the application process is complicated, it is likely to drive
out smaller players in the mobile gaming market. We believe there will be little impact on
big players, due to their greater resources. Therefore, we expect big players like Tencent
to benefit from the likely consolidation as they grab more share.
PC games: Core base stays resilient
We believe the new
regulation likely puts more
pressure on small CPs,
while big players like
Tencent to benefit from the
likely consolidation.
Figure 22: Revenue growth of PC games
60,000
16%
14%
50,000
12%
40,000
10%
30,000
8%
6%
20,000
4%
10,000
2%
-
0%
2014
2015
2016E
PC game revenue (Rmb mn)
2017E
2018E
YoY %
Source: Company data, Credit Suisse estimates
We expect Tencent will likely invest in more foreign gaming studios to make up for its
relatively weak in-house game development team, while NetEase and Perfect World will
Tencent Holdings
(0700.HK / 700 HK)
12
20 July 2016
still remain focused on in-house developed games. According to 17173, Tencent has eight
titles in the Top 30 PC games, among which only two titles are in-house developed games.
We forecast PC game revenue to reach Rmb48.9 bn in 2016, up 12% YoY.
Figure 23: Tencent's key PC titles stand stable in Top 3 (by power times)
Aug-15 Sep-15
Oct-15
Nov-15 Dec-15 Jan-16
Feb-16
0
Mar-16
Apr-16
May-16
Jun-16
5
10
15
20
25
30
League of Legends (T)
Dota2 (P)
Moonlight blade (T)
Cross Fire (T)
Hearth Stone (N)
Warcraft (N)
Dungeon & Fighter (T)
Call Of Duty OL (T)
T-Game (T)
Overwatch (N)
Source: Shunwang, "T" short for "Tencent", "N" for "NetEase" and "P" for "Perfect World"
According to Shunwang, Tencent's titles League of Legends, Cross Fire and Dungeon &
Fighter, have been stable in the Top 3 PC game rankings over the past year. Overall, 7 of
the Top 10 titles are from Tencent, in terms of power times.
In addition, Blizzard's new FPS title Overwatch (launched on 24 May 2016), made a strong
debut on the ranking board. We believe it will have large impact on Crossfire (#1 FPS
game in China), as Crossfire users have high loyalty. It appears that LoL may be more
directly affected but it's still too early to determine the sustainability of Overwatch. Even if
the traffic for LoL is impacted by Overwatch, the monetisation impact may lag.
Tencent's titles League of
Legends, Cross Fire and
Dungeon & Fighter, have
been stable in the Top 3 PC
game rankings over the past
year.
Figure 24: Ranking of PC games
Rank
Title
游戏名称
Developer
Operator
1
2
3
4
5
6
7
8
9
10
League of Legends
Dungeon & Fighter
Overwatch
Fantasy Westward Journey 2
Cross Fire
Hearthstone
World of Warcraft
JX 3
TLBB
Moonlight Blade
英雄联盟
地下城与勇士
守望先锋
梦幻西游 2
穿越火线
炉石传说
魔兽世界
剑网 3
新天龙八部
天涯明月刀
Riot Games
Neople
Blizzard
NetEase
Smilegate
Blizzard
Blizzard
Kingsoft
Changyou
Tencent
Tencent
Tencent
NetEase
NetEase
Tencent
NetEase
NetEase
Kingsoft
Changyou
Tencent
Source: Company data, 17173, Note:* Ranking date on 4-Jul-2016
In 17173's PC game ranking (measured by a weighted index, including playing users,
playing time, searching index, etc.), Tencent has 4 titles in the top 10, namely LoL,
Dungeon & Fighter, Cross Fire and Moonlight Blade. In addition, Tencent has 8 out
of Top 30.
Tencent Holdings
(0700.HK / 700 HK)
13
20 July 2016
Global expansion through M&As
In June 2016, Tencent announced it would buy up to an 84.3% stake in leading mobile
game developer Supercell for ~US$8.6 bn from SoftBank and other previous shareholders,
together with potential co-investors. The deal values Supercell at US$10.2 bn.
Supercell is one of the most successful game developers globally with games such as
Clash Royale, Clash of Clans, Boom Beach and Hay Day. It generated revenue of US$2.3
bn with a profit of US$964 mn in FY2015. With the launch of Clash Royal in 2016, both
revenue and profit should be growing decently in 2016E, likely 30%+ YoY if we estimate.
Figure 25: Revenue rank in mobile games by company, iOS + Android
Rank
By Revenue
Headquarters
Game Apps
1
2
3
4
5
6
7
8
9
10
Supercell
Tencent
Activision Blizzard
Machine Zone
NetEase
Mixi
BANDAI NAMCO
Netmarble
LINE
SQUARE ENIX
Finland
China
US
US
China
Japan
Japan
Korea
Japan
Japan
8
405
103
6
307
47
397
188
157
325
Source: App Annie, May 2016
We are positive for the following reasons: (1) adding the global leader Supercell with over
100 mn DAU to seal Tencent’s dominance, (2) “not consolidate or equity-account” gives
clarity to existing financial disclosure and enables independence of Supercell’s operation,
(3) cooperation to launch Tencent's version of Supercell’s products in China soon; and (4)
future outside co-investment to alleviate cash use burden.
We believe the deal could help alleviate investor concerns on the recent slowdown in
activities of LoL, due to the launch of Overwatch (Blizzard). Tencent should remain the
leader of online gaming market, both in China and overseas, especially in mobile games.
Before Supercell, Tencent had already had a long list of overseas investment in game
companies, like in the US, Korea and Japan, in order to secure its gaming pipeline,
especially on mobile. Tencent also owns shares in global big gaming companies. For
example, Tencent acquired 100% shares of Riot Game (developer of League of Legend)
in 2011. Tencent also owns 6% of Blizzard's (developer of Warcraft) shares.
We believe the Supercell
deal could help alleviate
investor concerns on LoL,
due to launch of Overwatch.
Tencent should remain the
leader of online gaming
market, both in China and
overseas, especially in
mobile games.
Figure 26: The world of Tencent Gaming investments
Source: Company data
Tencent Holdings
(0700.HK / 700 HK)
14
20 July 2016
Figure 27: Tencent's investment in gaming companies
Year
Company
2006
2007
2007
2008
2010
2010
2010
2010
2010
2010
2010
2010
2011
2011
2011
2011
2011
2012
2013
2013
2013
2014
2014
2014
2014
2014
2014
2014
2014
2014
2015
2015
2015
2015
2016
2016
GoPets
Yonghang
Vina Games
Outspark
Wangyu
GH Hope Island
Eyedentity
Redduck
Nextplay
Topping
Reloaded Studios
Studio Hon
Riot
Manyougu
Epic Games
Kingsoft network
Yinhan
Level Up
Blizzard
iDreamsky
Plain Vanilla
4:33 Creative Lab
Playdots
Aiming
Artillery
CJ Games
Qingtianzhu
TapZen
PATI Games
Yidongyule
Glu Mobile
Miniclip
Hammer&Chisel
Pocket Gems
Paradox Interactive
Supercell
Country
Amount
% of shares
Korea
Rmb32.8 mn
17%
China
n.a
63.90%
Korea
n.a
30.20%
US
US$11 mn
n.a
China
Rmb456 mn
100%
Korea
W2.5 bn
n.a
Korea
W4 bn
n.a
Korea
W1.5 bn
n.a
Korea
W1.5 bn
n.a
Korea
W1.5 bn
n.a
Korea
W5.5 bn
n.a
Korea
W1.45 bn
n.a
US
Rmb1.68 bn
100%
China
Rmb764 mn
62.50%
US
Rmb2.09 bn
48.40%
China
Rmb742 mn
15.30%
China
n.a
15%
Singapore
Rmb348 mn
100%
US
US$1.4 bn
6%
China
US$15 mn
20.40%
Iceland co-invest US$22 mn
n.a
Korea co-invest US$110 mn
n.a
US co-invest US$10mn
n.a
Japan
n.a
16.84%
US
n.a
n.a
Korea
US$500 mn
28%
China
Rmb150 mn
n.a
US
US$8 mn
n.a
Korea
W20 bn
n.a
China
Over Rmb10 mn
n.a
US
US$126 mn
14.60%
Switzerland
n.a largest shareholder
US
n.a
n.a
US
US$60 mn
20%
Sweden
Rmb138 mn
5%
Finland
US$8.6 bn
84.30%
Source: 17173.com
Tencent Holdings
(0700.HK / 700 HK)
15
20 July 2016
Investments: Bearing fruits for
future
Tencent's investment track record has been enriching its service offerings, refuelling
growth of its core user products, and winning credit from investor community for
management's forward looking industry insights. Although most investors have not
explicitly attributed value to many of Tencent's portfolio assets, we believe upcoming
value-unlock events from key assets, especially in eCommerce, O2O and finance, would
provide waves of value creation in the coming years, which would gradually prompt the
investor community to value it on an SOTP basis. Inclusion of Supercell in the form of a
dividend payout would also add another layer of optional value for shareholders.
Tencent's investment track
record has been enriching
its service offerings,
refuelling growth of its core
user products, and winning
credit from investor
community for
management's forward
looking industry insights.
Figure 28: Tencent's ecosystem
E-Commerce
JD
OTA
Finance
Social network
elong
WeBank
Wechat
Penguin Pictures
RRKD
LY.com
Futu
QQ/QQ Zone
Tencent Pictures
China South City
woqu.co
Tencent Weibo
Tencent Video
Mascotte HDS
ele.me
ZhongAn
Insurance
China Reading
Sinopec
1jiajie
Renrendai
Kakao Talk
58.co
Yixin Capital
Kiki
China Postal Bank
Same
O2O
CIP
Youxin
Maima
Meike
Missfr
Huak
Koud
Wanda ecommerc
BitAuto
Renrench
Didi
Zhihu
Media
Tencent Games
Lyft
U-Xian
Snapchat
MJBan
Whisper
Leju
AltspaceVR
Guaha
WhoSay
Dingxiang
PPYX
Huitong
Heirloom
Nanjing
More categories
Scaled Inference
Tencent Comic
Sanadu
QQ Music
Tile
Tencent Games
Weiying
Technology
Picooc
Kingsoft
Naviinfo
Dian FM
Sogou
Guagua.cn
Magic WiFi
Bona / Huayi
Huan
Source: Company data, Credit Suisse research
Tencent is most proactive in exploring and investing in start-ups among BAT. It mainly
focuses on minority investments. O2O remains the hottest category in Tencent's
investment initiatives. Major landmark transactions include joint investments in Didi Kuaidi,
Meituan Dianping and 58.com.
Tencent continues to adopt a strategic investment approach by forming firm cooperation
with invested companies, instead of taking a controlling stake. This mild approach also
allows Tencent to expand its investment coverage faster without paying excessive
premium in an acquisition transaction.
Tencent Holdings
(0700.HK / 700 HK)
16
20 July 2016
Figure 29: Tencent—total equity investment 2010-15
(US$Mn)
8,025
Figure 30: Tencent—investment transactions by category
Investment
amount (US$Mn)
6,000
5,000
5,522
O2O
4,000
3,000
2,000
1,187
522
2010
1,372
eCommerce
Social network
2011
2012
2013
Source: Company data, Credit Suisse research
2014
2015
Healthcare
Auto
1,000
684
Game
-
2
4
6
Media
8
10
12
Number of transactions
14
16
18
Source: Company data, Credit Suisse research
O2O services
Tencent focuses on high-frequency O2O services, including investment in Didi Kuaidi and
Dianping, etc. Significant offline exposure is needed, which is not the core strength.
Tencent likely leverages its capital on a more efficient basis.
Didi Kuaidi
Didi Kuaidi was merged by two leading taxi hailing companies, Didi and Kuaidi, in
February 2015. Since its inception, the competitive landscape of taxi market in China has
changed dramatically. By leveraging the mobile internet, DidiKuaidi has bridged offline taxi
hailing needs with online information to form an O2O closed loop. It innovatively improves
the user experience in taxi hailing, and enables taxi drivers to pick up passengers based
on current location and target destination, which reduces the communication cost between
drivers and passengers, and improves the utilisation rate of the taxi. According to
iResearch, Didi Kuaidi's market share in 2015 reached 88.4%.
Tencent focuses on highfrequency O2O services,
including investment in Didi
Kuaidi and Dianping, etc.
Significant offline exposure
is needed, which is not the
core strength.
Meituan Dianping
According Analysys, Meituan food delivery had around 33% market share. The merged
Meituan-Dianping, now named China Internet Plus (CIP), announced a record-breaking
US$3.3 bn financing on 20 January 2016, according to NetEase News. Tencent actively
invested at least US$1 bn in the latest round which boosts the new company's valuation to
US$18 bn. Meanwhile, Meituan-Dianping confirmed to continue its focus on food delivery
services – one of its key product categories after movie-ticket and group-buy – providing
financial support on fulfilment improvement and category expansion in the next 1-2 years.
Tencent Holdings
(0700.HK / 700 HK)
17
20 July 2016
Internet finance
Besides the O2O segment, internet finance is also one of the key focuses of Tencent. We
believe Tencent's internet finance business will contribute more meaningfully in 2017 with
payment and loan-related services. In our valuation for Tencent, we include the value of
internet finance-related businesses (Tenpay+WeChat payment, financial product
distribution, and micro loan valuation) at US$29.3 bn (or HK$24.2/sh). While the largest
value comes from payment, Tencent is making great efforts in non-payment financial
businesses, such as Licaitiong (its online wealth management product distribution) and the
small-micro lending business conducted by WeBank. We believe the financial business
will result in greater upside to its valuation.
We believe Tencent's
internet finance business
will contribute more
meaningfully in 2017 with
payment and loan-related
services.
Strong mobile payment progress
The number of mobile payment users exceeded 400 mn in 2015. This significant increase
was mainly driven C2C transactions (such as red envelope and money transfer), offline
payment promotions, games, and O2O payments.
Figure 31: Mobile payment market share in China (1Q16)
Lianlianpay
1.3%
Figure 32: Total online payment market share in 2015
Umpay PinganpayOthers
1.3%
1.2% 4.7%
Tenpay
20%
ChinaPnR
2%
Lakala
1.4%
Alipay
51.8%
Tenpay
38.3%
Source: iResearch
Alipay
58%
China
UnionPay
Online
6%
99Bill
4%
Others
10%
Source: iResearch, Credit Suisse estimates
According to iResearch, Tenpay was the second-largest player in the mobile payment
market, with 38% market share in 1Q16. As for the total online payment market (including
PC and mobile), Tenpay took ~20% of the market share in 2015. Due to its lack of a
strong e-commerce business historically, Tenpay's business has mainly focused on
Tencent's various entertainment-related services (games, red packets, etc.), and newly
acquired O2O services, such as taxi-hailing, restaurants, among others. Tencent's
aggressive Red Packet campaign during the Spring Festival contributed a lot to the rapid
growth of Tenpay and WeChat payment platforms. We expect Tenpay to be able to
leverage WeChat's large user base and active user engagement to enable more
innovative application scenarios.
WeChat Payment uses Tenpay for its back-end payment infrastructure. It has launched
various personal financial services, such as AA payment, lottery, mobile phone recharges,
utility fee payment, movie ticketing, O2O services, among others. According to Tencent, its
mobile payment application has more than 400mn users. In future, Tenpay may launch
more new functions through WeChat.
The main source of balance in the WeChat Wallet is Red Packet and Money transfer.
Tencent disclosed that 516mn WeChat users participated in a total of 32.1bn Red Packets
Tencent Holdings
(0700.HK / 700 HK)
18
20 July 2016
between 7 and 12 February 2016, Chinese Lunar New Year, compared with 3.27 bn
during the same period last year.
Figure 33: WeChat wallet features
cellphone bill payment
Licaitong: Tencent's internet finance platform
Uitilities payment services: water, electricity,
broadband, and etc
City services: such as tax services and gov
services
Wechat red packet
Third party services: Didi Chuxing, Train
tickets, Meilishuo, JD, Movie tickets, Dianping
Source: Company data, Credit Suisse research
In addition, Tenpay has been aggressive on promoting its payments in offline malls or
retailers. Tencent has established partnerships with supermarkets, such as Carrefour,
Wumei and Yonghui, to grab offline market share. We believe the promotion campaign will
continue in 2016 and the competition will intensify.
So far, WeChat payment is available with over 300,000 offline retailers and we believe this
number will continue to grow rapidly given Tencent's aggressive promotion. According to a
survey conducted by Penguin Intelligence, simple process, convenience and discounts are
the main factors that affect users' choice for WeChat payment. There are over 500mn
transactions daily through WeChat payment.
Valuation of Tencent's internet finance businesses
For Tencent, we value its internet finance-related business at US$29.3 bn, including
payment infrastructure revenue of US$23.5 bn, the financial product distribution business
at US$1.1 bn, and WeBank's small and micro loan business at US$4.7 bn.
Figure 34: Valuation of Tencent internet finance-related business (Tenpay + WeChat
We value its internet
finance-related business at
US$29.3 bn, including
payment infrastructure
revenue of US$23.5 bn, the
financial product distribution
business at US$1.1 bn, and
WeBank's small and micro
loan business at US$4.7 bn.
payment, financial product distribution, and micro loans)
Rmb bn
Payment infrastructure
Financial product distribution
Small & micro loans (WeBank)
2018E
market size
21,800
Tenpay
%
25.0%
Amount Economics Rev
Net
(2018)
Margin
5,450.0
0.40% 21.8
35%
396.9
0.25% 0.5
35%
43.7
10.00% 1.6
35%
NI P/E Valuation Valuation
Valuation
(Rmb bn) (US$ bn) (HK$ per share)
7.6 20
152.6
23.5
0.3 20
6.9
1.1
1.5 20
30.6
4.7
Total valuation
190.1
29.3
24.2
Source: Company data, Credit Suisse estimates
■
Payment value of US$23.5 bn
We assume Tencent, via Wechat mobile payment and Tenpay, to account for about 25%
of the total online payment market share in the long term. We see this as a relatively
Tencent Holdings
(0700.HK / 700 HK)
19
20 July 2016
conservative estimate of market share for Tencent, considering its recent progress in
offline payment.
We project the total online payment market to grow to US$21.8 bn in 2018. Tenpay
occupied 20% market share in 2015. With it further leveraging its large user base, we
expect its market share to grow to 25%.
■
Financial product distribution
We conservatively assume Tencent to distribute wealth management products worth
Rmb397 bn by 2018. By assuming Tencent could take a distribution fee of 0.25%, total
revenue from these products would be Rmb0.5 bn. We believe this number could have
further upside opportunities, as it is only 2% of total bank wealth management product
market size.
■
Small and micro loan
WeBank, founded in late 2014, is the first private internet bank in China. Tencent owns a
30% stake in WeBank. WeBank’s scope covers personal banking, corporate banking and
international banking. Its first product 'Weilidai', provides personal credit lines to users
without the need for guarantee or collateral, on a limited scale.
New challenges that mobile internet faces today: As a result of the rapid development
of mobile internet, internet finance companies are feeling increased pressure to deal with
the massive amount of customer request simultaneously and to serve a diversified
customer base with complex requirements and low loyalty. The traditional financial
services cannot provide the user experience that meets the customers' needs.
Focus on customer experience, big data analytics and highly effective, low cost
solutions: To solve the challenges, internet finance companies should aim for (1) best-inclass user experience that includes personalised, smart, forward-looking and active
services; (2) big data capabilities to study and understand customers' past behaviour,
financial record and social data; and (3) highly effective, low cost solution to support
simultaneous requests, 24-hour service, complex requests and to deal with multi-end,
multi-system environment.
Weilidai (微粒贷, "Micro Loan") effectively improved user experience, lowered cost
and improved revenue: The credit line product was specially designed to optimise
customer experience with an effective risk control system, based on multi-dimensional
user data. The solid model enables continuously decreasing marginal cost and
contribution to revenue. WeBank is expected to make profit from next year.
Innovative internet finance product to customers, great outlook ahead: WeBank
targets mass individuals between 25 and 35 years of age with an average loan size
around Rmb10,000 and an average repayment period of five months. Customers can
apply for such micro loans for setting up small businesses or for consumption. WeBank
aims to promote personal credit lines to more users in China and expand the market size,
as it believes there is a huge potential population to penetrate, and providing best products
and services will be the key competiveness.
As the lending business is still at an early stage, we apply a US$4.7 bn valuation to this
business, using 20x P/E on the back of Rmb1.5 bn profit it could generate in 2018E.
We assume WeBank would see loan balances grow from Rmb7.5 bn at end-2015 to
Rmb43.7 bn by mid-2018. We expect Tencent, as a referrer of borrowers to WeBank,
could be able to generate a net fee of around 3.5% of outstanding loan amount in 2018.
Tencent Holdings
(0700.HK / 700 HK)
20
20 July 2016
Valuation and risks
We maintain our OUTPERFORM rating with a TP of HK$230 (from HK$190)
We arrive at our target price using the following methodology:
(1) Main valuation methodology: P/E
Our main valuation methodology is forward P/E, as we see Tencent's strong earnings
power and cash flow are a testimony to the success of its franchise platform business
model. Our TP of HK$230, implies 33.4x FY17E dil. adj. P/E. This includes (1) internet
finance business valuation of HK$24.2/sh, and (2) core business valuation of HK$205.8/sh,
based on 30x FY17E, parallel with other global internet giants.
Figure 35: Global internet leaders comps table*
Mkt cap
Company
PE
Ticker
Ccy
Price
Rating
(US$ mn)
2016E
2017E
Tencent
0700.HK
HKD
185.0
O
224,435
33.8
26.3
Baidu
BIDU.US
USD
164.8
O
57,059
35.7
23.4
Alibaba
BABA.US
USD
82.7
O
207,652
33.1
25.8
FB.US
USD
119.4
O
341,435
33.3
24.5
GOOGL.US
USD
753.2
O
510,444
23.6
19.1
NFLX.US
USD
98.8
N
42,320
195.0
71.3
59.1
31.7
Facebook
Google
Netflix
Average
Our TP of HK$230, implies
33.4x FY17E dil. adj. P/E.
This includes (1) internet
finance business valuation
of HK$24.2/sh, and (2) core
business valuation of
HK$205.8/sh, based on 30x
FY17E.
Source: Company data, Bloomberg, Credit Suisse estimates. *Closing price of 18 Jul 2016.
(2) Sum-of-the-parts (SOTP)
We also use SOTP to gauge Tencent's valuation. We arrive at an SOTP value of
HK$228/sh. We estimate Tencent investment has a current market value of US$21 bn,
including JD.com, 58.com, Meituan Dianping, and other investments.
Figure 36: Tencent—SOTP valuation
Business lines
Community VAS
PC game
Mobile game
Brand & video ad
Performance-based ad
Tenpay & WeChat Payment
Net cash
Market value of investments
Total Value
Price per diluted share (Rmb)
Price per diluted share (HK$)
Revenue Earnings Multiple
(Rmb Mn)
Low
21,450
7,507
25x
52,126
23,457
12x
43,465
15,213
25x
21,754
3,916
20x
28,225
9,879
35x
-2,640
High
35x
17x
35x
30x
40x
Value
(Rmb Mn)
Low
187,685
281,481
380,320
78,315
345,761
190,143
31,298
141,484
1,636,488
172.8
201.2
High
262,759
398,765
532,448
117,473
395,156
190,143
31,298
141,484
2,069,526
218.6
254.4
Value
(Rmb mn)
Mid-point
225,222
340,123
456,384
97,894
370,458
190,143
31,298
141,484
1,853,007
195.4
227.5
Value
(US$ bn)
33.6
50.8
68.1
14.6
55.3
29.3
4.7
21.1
276.6
Value
(HK$)
Per share
27.7
41.8
56.0
12.0
45.5
24.2
3.8
16.5
227.5
Source: Company data, Credit Suisse estimates
Tencent Holdings
(0700.HK / 700 HK)
21
20 July 2016
Share price risks
Positive share price drivers and catalysts
1)
Stronger-than-expected mobile game pipeline. Tencent's strong R&D and
distribution capabilities could help attract cooperation in mobile titles on big IPs. In
addition, the strengthened regulation of SARFT might result in further
consolidation of the mobile gaming market, which is favourable to big players, like
Tencent.
2)
Opportunities from internet finance (lending, payment, and product distribution). If
Tencent could perform well in promoting its Tenpay and Weilidai businesses, it
could make a more meaningful contribution to Tencent, which will be helpful for
the valuation upside.
3)
Further monetisation on SNS. For SNS, as the user growth likely slows down,
ARPU might be the next growth driver the SNS revenue. Tencent's various O2O
scenarios could help bring in more monetisation chances.
4)
Better growth and profitability in investment initiatives. Tencent has made
investments in almost all verticals during past years. If those start-ups or baby
tigers could grow healthily, it could contribute to Tencent on both topline and
bottomline positively.
Downside risks
1)
Slower-than-expected MAU growth of SNS due to the existing large user base.
There is limited room for further penetration. In addition, the growth in smartphone
shipments has also slowed down.
2)
Headwinds in China's macro economy, which negatively impact the advertising
industry, including online advertising. This would result in decreased advertising
budget for advertisement customers.
3)
Slower-than-expected performance-based ad growth with Tencent not able to
balance user experience with monetisation. Tencent announced that there will not
be a very fast release of ad inventories on Moments. The progress might also be
delayed if user experience was affected.
4)
Competition from other players in online video business. Tencent's video is facing
stiff competition from other players, such as iQiyi, Youku Tudou and Sohu video,
which might lift the cost in content acquisition.
5)
Faster-than-expected slowdown in PC games. PC game growth has slowed down
during the past few years to low-single-digit. If no further efforts were made to
extend the lifecycle of key PC titles or develop new games, contribution from PC
games might shrink going forward.
6)
High base of mobile games may make growth rate look soft from 2017E. Tencent
would need to introduce another suite of decent mobile titles while keeping
current portfolio steadily growing, which is not an easy task, in our view.
Tencent Holdings
(0700.HK / 700 HK)
22
20 July 2016
Earnings revision
We revise up our 16E/17E/18E non-GAAP EPS by 0.8%/3.3%/5.1%, mainly due to:
1) Revised up video revenue meaningfully, to reflect robust contribution from mobile and
timeline based offerings in WeChat;
2) Slightly increased performance-based ad growth trajectory, mainly from better WeChat
ad growth in 2Q16 and beyond;
3) Increased mix of licensed mobile games title vs in-house to reflect recent trends.
Figure 37: Earnings revision table
Revised
2016E
Prior
RMB Mn
2Q16E
3Q16E
4Q16E
2017E
2018E
Total Revenue
VAS
Online Advertising
Others
Gross Profit
Gross Profit Margin
Adj. Optg Profit
Adj. OPM(%)
Reported Net Income
Net Income (ex. SBC)
Adj. NPM
Reported Dil. EPS (RMB)
Adj. Dil. EPS (ex. SBC)
34,736
24,907
7,453
2,377
19,955
57.4%
13,448
38.7%
9,575
11,133
32.1%
1.01
1.17
37,399
26,006
8,969
2,424
21,614
57.8%
14,131
37.8%
10,110
11,668
31.2%
1.07
1.23
39,164 143,294 177,416 221,916
26,750 102,627 117,041 130,208
9,941 31,064 49,980 80,456
2,473
9,603 10,395 11,252
22,775 82,934 103,396 132,291
58.2% 57.9% 58.3% 59.6%
14,037 54,663 68,454 89,790
35.8% 38.1% 38.6% 40.5%
9,967 38,835 50,098 66,944
11,525 44,358 57,015 74,685
29.4% 31.0% 32.1% 33.7%
1.05
4.10
5.28
7.06
1.22
4.68
6.01
7.88
2Q16E
2.6%
0.0%
13.5%
0.0%
2.8%
0.14
2.3%
(0.12)
1.8%
1.6%
(0.33)
0.1%
-0.2%
3Q16E
3.8%
1.1%
13.6%
0.0%
4.1%
0.15
4.0%
0.07
5.4%
4.6%
0.25
3.6%
2.8%
4Q16E
4.5%
1.5%
14.7%
0.0%
5.2%
0.39
2.4%
(0.71)
2.2%
1.9%
(0.74)
0.5%
0.2%
2016E
2.8%
0.7%
11.6%
0.0%
3.1%
0.18
2.2%
(0.23)
2.4%
2.1%
(0.22)
1.1%
0.8%
2017E
2.6%
-1.0%
12.7%
0.0%
2.1%
(0.25)
4.6%
0.75
5.6%
4.9%
0.72
3.8%
3.3%
2018E
2.8%
-4.8%
18.4%
0.0%
2.0%
(0.46)
6.6%
1.45
7.8%
6.9%
1.30
5.9%
5.1%
Source: Company data, Credit Suisse estimates
Tencent Holdings
(0700.HK / 700 HK)
23
20 July 2016
Appendix I: Financial summary
Income statements
Figure 38: Tencent's revenue growth
250,000
45%
40%
200,000
35%
30%
150,000
25%
20%
100,000
15%
10%
50,000
5%
-
0%
2014
2015
2016E
2017E
Total revenue (Rmb mn)
2018E
YoY %
Source: Company data, Credit Suisse estimates
In 2015, Tencent's revenue reached Rmb102.9 bn, up 30% YoY. We expect Tencent's
revenue to witness a three-year CAGR of 29% and reach Rmb222 bn in 2018E.
Figure 39: Tencent—revenue breakdown
100%
90%
17%
80%
8%
9%
5%
11%
17%
7%
6%
22%
28%
70%
5%
36%
60%
50%
53%
57%
55%
40%
49%
44%
39%
30%
20%
10%
22%
24%
23%
23%
22%
20%
2013
2014
2015
2016E
2017E
2018E
0%
Social networks
Online game
Online advertising
Others
Source: Company data, Credit Suisse estimates
Tencent earns 78% revenue from VAS, including Social networks (23%) and online game
(55%); 17% from online advertising; 5% from others. Online game is still the largest
contributor of Tencent's revenue, over half of its revenue. Revenue contribution from
online advertising kept rising for the past few years, and we believe this momentum will
continue due to the rapid growth of performance-based ad revenue.
Tencent Holdings
(0700.HK / 700 HK)
24
20 July 2016
Figure 40: Tencent's margin trend
70.0%
60.9%
60.0%
59.5%
57.9%
58.3%
59.6%
38.2%
38.1%
40.5%
31.1%
31.0%
38.6%
32.1%
54.0%
50.0%
40.0%
35.3%
30.7%
30.0%
28.2%
30.0%
33.7%
20.0%
10.0%
0.0%
2013
2014
2015
GPM
2016E
2017E
Adj. OPM
2018E
Adj. NPM
Source: Company data, Credit Suisse estimates
Tencent's gross margin was 59.5% in 2015, vs 60.9% in 2014. Tencent's adj. OP and NP
have improved during the past few years, to 38.2% and 31.1% in 2015. We look for a
gradual improvement in net margin in the next two years, due to the mix of high margin
business like performance-based ad and the leverage on expenses.
Balance sheet
Tencent had Rmb56.6 bn of cash and cash equivalents as of end-1Q16 vs. Rmb43.4 bn
as of end-2015 and Rmb42.7 bn as of end-2014.
Figure 41: Balance of cash and cash equivalents
60,000
50,000
40,000
30,000
20,000
10,000
0
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
Cash and cash equivalents (Rmb mn)
Source: Company data, Credit Suisse estimates
Tencent Holdings
(0700.HK / 700 HK)
25
20 July 2016
Cash flow statements
Net cash from operating activities amounted to Rmb45.4 bn in 2015. Net cash flow used in
investing activities was Rmb63.6 bn, net cash from financing activities was Rmb18.5 bn.
Tencent incurred capital expenditures of Rmb7.71 bn in 2015. Free cash flow was
Rmb37.7 bn in 2015.
Revenue booking for online games
For online games, it was paid by way of prepaid cards and tokens through channels such
as sales agents and eCommerce platforms. The users register the prepaid cards and
tokens to their user accounts to buy virtual items. Receipts from the sales of prepaid cards
and tokens are deferred and recorded as “Deferred revenue”. The amounts are then
recognised as revenue based on the actual utilisation of the respective payment units: (i)
when the payment unit is used to purchase virtual items or tools, revenue is recognised
when the related services are rendered; (ii) when the payment unit is used to purchase
virtual products/items, the revenue is recognised over the estimated lifespan of the
respective virtual products/ items or over the expected user relationship.
Figure 42: Growth of online game revenue and deferred revenue
30,000
25,000
20,000
15,000
10,000
5,000
1Q14
2Q14
3Q14
4Q14
Online games revenue (Rmb mn)
1Q15
2Q15
3Q15
4Q15
1Q16
Defered Revenue (Rmb mn)
Source: Company data, Credit Suisse estimates
In addition, for mobile game revenue recognition, Tencent books 40% of net revenue in
social networks segment (within VAS) and 60% in games segment.
Before 4Q14, revenue booked was NET of revenue sharing and net of channel fee (iOS).
From 4Q14 onward, revenue booking includes sharing with third-party
developers/channels, and Tencent books these sharing fees as COGS.
Tencent Holdings
(0700.HK / 700 HK)
26
Tencent Holdings
(0700.HK / 700 HK)
Figure 43: Quarterly financial forecasts for Tencent
2014
(RMB in M, year-end Dec)
1Q
2Q
3Q
Net Revenue
18,400
19,746
19,808
Internet VAS
14,413
15,713
16,047
Social Networks
4,026
4,632
4,723
Games
10,387
11,081
11,324
Online Advertising
1,177
2,064
2,440
eCommerce
2,524
1,324
459
Others
286
645
862
Cost of Revenue
-7,800
-7,574
-7,167
Gross Profit
10,600
12,172
12,641
Operating Expenses
-4,792
-5,426
-5,696
Sales & Mktg. expenses
-1,855
-1,973
-1,906
G&A expenses
-2,937
-3,453
-3,790
Share-based compensation
-328
-418
-536
EBIT
5,808
6,746
6,945
Adj. EBIT (ex SBC, other losse/gain)6,136
7,164
7,481
EBITDA
7,115
8,468
8,703
Interest Income
375.0
406.0
452.0
Other Gain, Net
1,607.0
691.0
118.0
Finance Cost
238.0
354.0
317.0
Share of profit of associates
-45.0
-23.0
139.0
Share of profit of joint ventures
1.0
0.0
0.0
Pre Tax Profit
7,596
7,512
7,059
Tax (Expense)/Credit
-1,164
-1,686
-1,383
Minority Interest
25
10
-19
Net Profit
6,457
5,836
5,657
Adj. Net Profit (ex SBC, amort and one-time
5,194
gains)
5,874
6,433
Pre Tax EPS (RMB)
0.82
0.81
0.76
Diluted EPS (RMB)
0.69
0.62
0.60
Adj. Diluted EPS (RMB, ex SBC, Amort
0.55
and one-time
0.63 gains)0.69
Margins (%)
Gross Margin
57.6
61.6
63.8
Reported Op. Margin
31.6
34.2
35.1
Adj. Op. Margin
33.3
36.3
37.8
EBITDA Margin
38.7
42.9
43.9
Net Margin
35.1
29.6
28.6
Adj. Net Margin
28.2
29.7
32.5
Sequential Growth (%)
Net Revenue
8.4
7.3
0.3
Gross Profit
20.8
14.8
3.9
Adj. EBIT
44.5
16.8
4.4
Pre Tax Profit
60.3
-1.1
-6.0
Net Profit
65.1
-9.6
-3.1
Adj. Net Profit
15.5
13.1
9.5
Diluted EPS
64.7
-9.6
-3.0
Adj. Diluted EPS
15.2
13.1
9.6
4Q
20,978
17,137
5,173
11,964
2,627
446
768
-8,332
12,646
-6,038
-2,063
-3,975
-488
6,608
7,096
8,526
443.0
343.0
273.0
275.0
0.0
6,846
-892
-94
5,860
6,723
0.74
0.62
0.72
1Q
22,399
18,626
5,313
13,313
2,724
0
1,049
-8,965
13,434
-4,994
-1,326
-3,668
-541
8,440
8,981
10,645
521.0
411.0
433.0
310.0
0.0
8,629
-1,699
-47
6,883
7,119
0.93
0.73
0.76
60.3
31.5
33.8
40.6
27.9
32.0
60.0
37.7
40.1
47.5
30.7
31.8
5.9
0.0
-5.1
-3.0
3.6
4.5
3.3
4.2
6.8
6.2
26.6
26.0
17.5
5.9
17.4
5.8
2015
2Q
23,429
18,428
5,458
12,970
4,073
0
928
-8,991
14,438
-5,612
-1,601
-4,011
-699
8,826
9,525
11,131
598.0
612.0
341.0
452.0
0.0
9,243
-1,847
-82
7,314
7,975
0.99
0.78
0.85
3Q
26,594
20,547
6,214
14,333
4,938
0
1,109
-11,014
15,580
-6,422
-2,042
-4,380
-780
9,158
9,938
11,961
559.0
614.0
481.0
702.0
0.0
9,148
-1,564
-139
7,445
8,101
0.98
0.79
0.86
4Q
30,441
23,068
7,097
15,971
5,733
0
1,640
-12,661
17,780
-7,790
-3,024
-4,766
-809
9,990
10,799
13,352
649.0
249.0
363.0
1,329.0
0.0
9,196
-1,998
-34
7,164
8,807
0.99
0.76
0.93
1Q
31,995
24,964
7,879
17,085
4,701
0
2,330
-13,406
18,589
-6,400
-2,032
-4,368
-857
12,189
13,046
15,725
703.0
506.0
491.0
1,089.0
0.0
11,818
-2,550
-85
9,183
10,032
1.26
0.97
1.06
61.6
37.7
40.7
47.5
31.2
34.0
58.6
34.4
37.4
45.0
28.0
30.5
58.4
32.8
35.5
43.9
23.5
28.9
58.1
38.1
40.8
49.1
28.7
31.4
4.6
7.5
6.1
7.1
6.3
12.0
6.1
11.9
13.5
7.9
4.3
-1.0
1.8
1.6
1.8
1.6
14.5
14.1
8.7
0.5
-3.8
8.7
-4.1
8.3
5.1
4.6
20.8
28.5
28.2
13.9
27.7
13.4
2016E
2QE
34,736
24,907
7,959
16,948
7,453
0
2,377
-14,781
19,955
-7,364
-2,432
-4,933
-857
12,591
13,448
16,271
791.9
506.0
510.5
1,089.0
0.0
12,290
-2,629
-85
9,575
11,133
1.31
1.01
1.17
3QE
37,399
26,006
8,378
17,628
8,969
0
2,424
-15,785
21,614
-8,340
-2,805
-5,535
-857
13,274
14,131
17,060
606.3
506.0
510.5
1,089.0
0.0
12,787
-2,592
-85
10,110
11,668
1.37
1.07
1.23
4QE
39,164
26,750
8,643
18,107
9,941
0
2,473
-16,389
22,775
-9,595
-3,721
-5,875
-857
13,180
14,037
17,029
692.5
506.0
510.5
1,089.0
0.0
12,779
-2,727
-85
9,967
11,525
1.37
1.05
1.22
1QE
38,901
28,149
9,254
18,895
8,230
0
2,522
-16,027
22,874
-7,897
-2,645
-5,252
-1,028
14,977
16,006
18,960
726.5
506.0
425.4
1,089.0
0.0
14,696
-3,145
-85
11,466
13,195
1.57
1.21
1.39
57.4
36.2
38.7
46.8
27.6
32.1
57.8
35.5
37.8
45.6
27.0
31.2
58.2
33.7
35.8
43.5
25.4
29.4
58.8
38.5
41.1
48.7
29.5
33.9
8.6
7.4
3.1
4.0
4.3
11.0
4.1
10.8
7.7
8.3
5.1
4.0
5.6
4.8
5.6
4.8
4.7
5.4
-0.7
-0.1
-1.4
-1.2
-1.4
-1.2
-0.7
0.4
14.0
15.0
15.0
14.5
15.0
14.5
2017E
2QE
43,408
28,536
9,454
19,082
12,300
0
2,573
-18,156
25,252
-9,116
-3,039
-6,077
-1,028
16,136
17,164
20,342
775.6
506.0
425.4
1,089.0
0.0
15,903
-3,386
-85
12,432
14,161
1.70
1.31
1.49
2014
2015
2016E
2017E
2018E
3QE
46,432
29,723
9,910
19,813
14,085
0
2,624
-19,477
26,955
-10,215
-3,482
-6,733
-1,028
16,740
17,769
21,085
976.2
506.0
425.4
1,089.0
0.0
16,708
-3,370
-85
13,253
14,983
1.79
1.40
1.58
4QE
48,674
30,634
10,218
20,416
15,364
0
2,676
-20,360
28,315
-11,828
-4,624
-7,204
-1,028
16,487
17,515
20,924
1,068.8
506.0
425.4
1,089.0
0.0
16,547
-3,515
-85
12,947
14,676
1.77
1.37
1.55
78,932
63,310
18,554
44,756
8,308
4,753
2,561
-30,873
48,059
-21,952
-7,797
-14,155
-1,770
26,107
27,877
32,812
1,676
2,759
1,182
346
1
29,013
-5,125
-78
23,810
24,224
3.14
2.54
2.59
102,863
80,669
24,082
56,587
17,468
0
4,726
-41,631
61,232
-24,818
-7,993
-16,825
-2,829
36,414
39,243
47,090
2,327
1,886
1,618
2,793
0
36,216
-7,108
-302
28,806
32,002
3.90
3.06
3.40
143,294
102,627
32,859
69,768
31,064
0
9,603
-60,360
82,934
-31,699
-10,989
-20,710
-3,428
51,235
54,663
66,084
2,794
2,024
2,022
4,356
0
49,674
-10,499
-340
38,835
44,358
5.31
4.10
4.68
177,416
117,041
38,836
78,205
49,980
0
10,395
-74,020
103,396
-39,056
-13,790
-25,265
-4,114
64,340
68,454
81,310
3,547
2,024
1,702
4,356
0
63,854
-13,416
-340
50,098
57,015
6.82
5.28
6.01
221,916
130,208
44,566
85,642
80,456
0
11,252
-89,625
132,291
-47,437
-17,025
-30,413
-4,936
84,853
89,790
104,284
4,228
2,024
1,702
4,356
0
85,048
-17,764
-340
66,944
74,685
9.09
7.06
7.88
58.2
37.2
39.5
46.9
28.6
32.6
58.1
36.1
38.3
45.4
28.5
32.3
58.2
33.9
36.0
43.0
26.6
30.2
60.9
33.1
35.3
41.6
30.2
30.7
59.5
35.4
38.2
45.8
28.0
31.1
57.9
35.8
38.1
46.1
27.1
31.0
11.6
10.4
7.2
8.2
8.4
7.3
8.4
7.3
7.0
6.7
3.5
5.1
6.6
5.8
6.6
5.8
4.8
5.0
-1.4
-1.0
-2.3
-2.0
-2.3
-2.0
30.6
47.2
53.8
50.5
53.6
42.0
53.1
41.5
30.3
27.4
40.8
24.8
21.0
32.1
20.5
31.6
39.3
35.4
39.3
37.2
34.8
38.6
33.7
37.5
58.3
36.3
38.6
45.8
28.2
32.1
1.18
23.8
24.7
25.2
28.5
29.0
28.5
29.0
28.5
59.6
38.2
40.5
47.0
30.2
33.7
1.52
25.1
27.9
31.2
33.2
33.6
31.0
33.6
31.0
Source: Company data, Credit Suisse estimates
20 July 2016
27
20 July 2016
Appendix II: List of recent
investments
Figure 44: Major M&A/investments since 2015
Company Target
Deal date Invest amt
% of Sector
(US$ mn)* ownership
Notes
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
UCMed
Yitiku
Chengmi
Nanjing line 0
BitAuto
YiXin Capital
Jan-15
Jan-15
Jan-15
Jan-15
Jan-15
Jan-15
24
3
2
30
150
150
NA
NA
NA
NA
3.3%
26.6%
Healthcare
Education
O2O
O2O
Auto
Auto
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
ele.me
Jan-15
carlife
Jan-15
Huakai
Feb-15
1jiajie
Feb-15
M4JAM
Feb-15
Miniclip
Feb-15
Robot
Feb-15
Entertainment
Gangtai
Mar-15
Ning Meng Pictures Mar-15
Cyanogen
Mar-15
Dianping.com
Apr-15
58.com
Apr-15
350
1
10
400
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
O2O
Auto
e-commerce
O2O
Corporate service
Game
Game
Start-up focusing on mobile hospital service
Local life recommendation app
strong player in online education market
A popular APP for online food delivery
Online auto platform
Subsidiary of Bitauto engaged in e-commercerelated automotive financing platform business
A leading player in O2O food ordering market
Online auto price comparison website
A flower related e-commerce start-up company
A leading housekeeping service O2O platform
A South Africa-based mobile job service
A leading game developer in Switzerland
A western game company
NA
16
80
850
400
NA
NA
NA
NA
25%
O2O
Media
Mobile Internet
O2O
O2O
Jewellery e-commerce and entertainment
A TV production start-up focused on internet
A leading open-source operating system
Well known online local life list site
To form the largest classified site in China
EC Yingtongke
Weiying
Technology
Glu Mobile
Scanadu Scout
Huan network
Pocket Gems
Huitong Tianxia
Huochebang
Tissue Analytics
VC mobile
Entertainment
Lyft
Yinyuefm.com
Apr-15
Apr-15
NA NA
105 NA
Corporate service
Media
Player in mobile CRM system market
A top online movie ticket app in China
Apr-15
Apr-15
May-15
May-15
May-15
May-15
May-15
May-15
126
35
8
60
30
16
0.75
4.5
Game
Healthcare
Media
Game
Logistics
Logistics
Healthcare
Game
A game developer based in San Francisco
A medtech building mobile medical products
A subsidiary of TCL focusing on internet TV
A popular US mobile entertainment company
A strong player in online logistics platform
A leading O2O logistics firm
A US-based wound care start-up
Producing and publishing games for iOS and Android
May-15
Jun-15
150 NA
2 NA
O2O
Media
Jun-15
Jun-15
Jun-15
Jun-15
Tencent
Tencent
Tencent
MJBang
Fengkuang Laoshi
NEXTEV
Mascotte Holdings
Limited
U-Xian
HomeHero
Maimaibao
A ridesharing service company
A music app enabling users to listen,
share pictures and content
An O2O interior design platform
A mobile education app for ages K-12
A producer of electric vehicles, China's Tesla
O2O provider in property management
Jun-15
Jun-15
Jul-15
10 NA
20 NA
NA NA
Tencent
Tencent
LY.com
Didi Kuaidi
Jul-15
Jul-15
390 NA
2000 NA
Online Travel
O2O
A menu preview and ordering service app
A player in home senior care services market
A leading mobile commerce site focusing on 3-4rd
tier cities and factory towns
The third-largest player in online travel market
The largest car-hailing app in China
Tencent
Tencent
Tencent
Tencent
Meike International
1Jiajie
Yingle.com
AltspaceVR
Jul-15
Jul-15
Jul-15
Jul-15
136
16
1.6
10.3
e-commerce
O2O
O2O
Corporate service
A manufacturer and trader of sporting goods
Strong player in online housekeeping market
A Chinese O2O legal service provider
A virtual reality software company
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
1
20
16
96.74
14.60%
NA
7.14%
20%
NA
NA
NA
NA
NA
NA
NA
75%
25.30%
NA
NA
NA
O2O
Education
Auto
Solar
O2O
Healthcare
e-commerce
Tencent Holdings
(0700.HK / 700 HK)
28
20 July 2016
Figure 44: Major M&A/investments since 2015
Company Target
Deal date Invest amt
(US$ mn)*
Jul-15
1.6
Aug-15
10
Aug-15
1
Aug-15
85
Aug-15
NA
Aug-15
60
Aug-15
90.0
% of
ownership
NA
NA
NA
NA
NA
NA
NA
Sector
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Magic Wi-Fi
MemBlaze
PPYX
Renren che
eLong
Futu
Practo
Hardware
Hardware
Social network
Auto
Online Travel
Internet Finance
Healthcare
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Aug-15
Aug-15
Aug-15
Aug-15
Aug-15
Aug-15
Sep-15
206
50
8.1
1.6
630
10
16
8%
NA
NA
NA
NA
NA
NA
Media
Social network
Media
Corporate service
O2O
Software
Media
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Huayi Brothers
Kiki
51yund.com
Nanjiquan
ele.me
Vurb
Original Force
Animation
Medlinker
Tiantian Paiche
Clinicloud
Guahao
Artillery
Gbcom
Sep-15
Sep-15
Sep-15
Sep-15
Oct-15
Oct-15
40
73
5
394
NA
2
NA
NA
NA
NA
NA
3%
Healthcare
Auto
Healthcare
Healthcare
Game
Mobile internet
Tencent
Zhihu
Nov-15
55 NA
Tencent
Tencent
Nov-15
Nov-15
31 NA
235 NA
Tencent
Tencent
Tencent
Tencent
Tencent
Missfresh
Weiying
Technology
Guahao
China Postal Bank
Women.com
Lufax
Meituan Dianping
Nov-15
Dec-15
Jan-16
Jan-16
Jan-16
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Koolearn.com
Parkbees
Ibibo Group
ABC360
Ningmeng Pictures
Soyoung.com
"who" app
HB Entertainment
Yuanbaopu
Wesai
Xiaohongshu
Huoyunren
Lianjia.com
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
iCarbonX
budejie.com
56QQ
Kamcord
Weiyingshidai
Shuidihuzhu
Wocloud
Yingle.com
Notes
Social network
China's largest Free Wi-Fi provider in industrial
Designs and manufactures solid-state drives
An SNS app for sharing personal stories
increased collective investment in auto market
Privatisation proposal from Tencent
China's leading internet securities trader
A marketplace/ search portal that connects patients
with doctors and medical organisations
China’s largest private-sector film company
Leading messaging application in Canada
An O2O platform for sports community
Provide HR, entrepreneurship services
A leading player in O2O food ordering market
A mobile search engine app
An animation studio focusing on digital
entertainment content making
A mobile commination platform for physicians
A used car C2B auction platform
An Australian start-up
An online medical service provider in China
A Wireless Broadband service provider
PC Game Developer Artillery is a California-based
free-to-play developer
A Chinese question-and-answer website
e-commerce
Media
An online grocery retailer
A top online movie ticket app in China
300 1%
NA NA
1.75 NA
1216 NA
3300 NA
Healthcare
Internet Finance
Social network
Internet Finance
O2O
An online medical service provider in China
China's largest commercial bank
A social networking site for females
A comprehensive internet finance platform
Largest O2O platform in China
Feb-16
Feb-16
Feb-16
Mar-16
Mar-16
Mar-16
Mar-16
Mar-16
Mar-16
Mar-16
Mar-16
Apr-16
Apr-16
50 NA
12 NA
250 NA
15.3 NA
76 NA
50 NA
1.5 NA
36.3 NA
15.3 NA
NA
100 NA
45 NA
923 NA
Education
O2O
Online Travel
Education
Media
Healthcare
Social network
Media
Internet Finance
Sport
eCommerce
Logistics
Real estate
New Oriental's online education platform
Car parking apps
India's leading online travel group
Online language course company
Shanghai-based boutique studio firm
O2O surgery appointment reservation platform
Social network application
Korean media company
Internet finance big data service platform
Online ticketing platform for sports tickets
Cross border eCommerce platform
Logistics data provider
O2O real estate agency
Apr-16
Apr-16
Apr-16
Apr-16
Apr-16
May-16
May-16
May-16
153 NA
1.5 NA
35 NA
10 NA
462 NA
7.7 NA
0.2 NA
1.53 NA
Healthcare
Entertainment
Logistics
Game
Media
Healthcare
Cloud
Cloud
Health and medical big data company
Mobile content production and distribution platform
Truck O2O platform
US-based mobile game video recording SDK
Online movie ticketing platform
Insurance platform
One-stop mobile internet VAS service provider
Legal services O2O platform
Tencent Holdings
(0700.HK / 700 HK)
29
20 July 2016
Figure 44: Major M&A/investments since 2015
Company Target
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Tencent
Planetary
Resources
Paradox Interactive
Yuantiku
Fun in Funding
YG Entertainment
Sipaiwangluo
Yichemall
Meta
WME IMG
Entstudy
Supercell
Deal date Invest amt
% of Sector
(US$ mn)* ownership
May-16
20.73 NA
Cloud
Notes
May-16
May-16
Jun-16
Jun-16
Jun-16
Jun-16
Jun-16
Jun-16
Jun-16
Jun-16
Swedish game publisher
Online tutoring platform
Social crowd funding platform
Korea's leading talent agency
Cancer big data company
Auto O2O platform
AR technology company
Entertainment and sports agency
An online platform for K12 education
A leading global mobile game developer
NA
40 NA
20 NA
85 NA
10 NA
50 NA
50 NA
45 NA
18.5 NA
8,600 84%
Game
Education
Internet Finance
Entertainment
Healthcare
Auto
Hardware
Entertainment
Education
Game
Asteroid mining company
Note: * Investment amount in some cases refers to the aggregate amount invested, as it is difficult to derive the exact portion invested by each
company.
Source: Company data, Credit Suisse research
Tencent Holdings
(0700.HK / 700 HK)
30
20 July 2016
Companies Mentioned (Price as of 18-Jul-2016)
58.com Inc. (WUBA.N, $47.76)
Alibaba Group Holding Limited (BABA.N, $82.65)
Alphabet (GOOGL.OQ, $753.2)
Amazon com Inc. (AMZN.OQ, $736.07)
Baidu Inc (BIDU.OQ, $164.79)
Bitauto Holdings Limited (BITA.N, $27.96)
Changyou.com Ltd (CYOU.OQ, $21.03)
Facebook Inc. (FB.OQ, $119.37)
Google (GOOAV.OQ, $568.67)
Kingsoft Corporation Limited (3888.HK, HK$13.28)
NetEase.com (NTES.OQ, $199.43)
Netflix, Inc. (NFLX.OQ, $98.81)
SOHU.COM INC. (SOHU.OQ, $39.53)
Supercell (Unlisted)
Tencent Holdings (0700.HK, HK$185.0, OUTPERFORM, TP HK$230.0)
Twitter (TWTR.N, $18.65)
Westhouse Hldg (WHL.L^B13, 9.5p)
Disclosure Appendix
Important Global Disclosures
Evan Zhou and Zoe Zhao each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this
report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was,
is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
3-Year Price and Rating History for Tencent Holdings (0700.HK)
0700.HK
Date
26-Sep-13
16-Jan-14
15-May-14
08-Aug-14
11-Aug-14
13-Nov-14
19-Mar-15
11-May-15
05-Aug-15
13-Aug-15
10-Nov-15
14-Jan-16
15-Feb-16
18-Mar-16
19-May-16
Closing Price
(HK$)
81.80
102.50
108.80
129.80
132.30
129.50
145.00
158.60
142.40
144.10
150.40
137.10
138.20
157.90
157.20
Target Price
(HK$)
88.00
123.80
650.00
130.00
155.00
150.00
160.00
190.00
180.00
175.00
179.00
173.00
176.00
185.00
190.00
Rating
N*
O
N EU T RA L
O U T PERFO RM
* Asterisk signifies initiation or assumption of coverage.
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which
consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total
return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the
most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings
are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian
ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within
an analyst’s coverage universe. For Australian and New Zealand stocks, the expected tota l return (ETR) calculation includes 12-month rolling dividend yield. An
Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned
where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Pr ior to 18
Tencent Holdings
(0700.HK / 700 HK)
31
20 July 2016
May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5% , which was in operation from 7 July
2011.
Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other
circumstances.
Not Rated : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company
at this time.
Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment
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Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
months or the analyst expects significant volatility going forward.
Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or
valuation of the sector* relative to the group’s historic fundamentals and/or valuation:
Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.
Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.
Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.
*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating
Versus universe (%)
Of which banking clients (%)
Outperform/Buy*
51%
(43% banking clients)
Neutral/Hold*
35%
(17% banking clients)
Underperform/Sell*
13%
(38% banking clients)
Restricted
1%
*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely
correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to
definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.
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Target Price and Rating
Valuation Methodology and Risks: (12 months) for Tencent Holdings (0700.HK)
Method: Our TP HK$230 implies 33.4x FY17E dil. Adj. P/E. This includes (1) internet finance business value of HK$24.2, and (2) core business
value of HK$205.8/sh implies 29.9x FY17E and 22.8x FY18E P/E. With Tencent's long-term potential in internet finance, social ads and
other O2O opportunities, we see 25% growth rate is sustainable. This supports our OUTPERFORM rating.
Risk:
Risks that could impede achievement of our HK$230 target price and Outperform rating for Tencent Holdings include slower-thanexpected online games revenue growth and further delays in social ad launch. Risks also include: (i) slower WeChat user growth, leading
to lower long-term growth expectations, and (ii) slowdown in both PC and mobile games.
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the
target price method and risk sections.
See the Companies Mentioned section for full company names
The subject company (BIDU.OQ, BABA.N, AMZN.OQ, FB.OQ, NFLX.OQ, NTES.OQ, 3888.HK, CYOU.OQ, SOHU.OQ, WUBA.N, BITA.N) currently
is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.
Credit Suisse provided investment banking services to the subject company (BABA.N, FB.OQ, 3888.HK, CYOU.OQ, SOHU.OQ, WUBA.N, BITA.N)
within the past 12 months.
Tencent Holdings
(0700.HK / 700 HK)
32
20 July 2016
Credit Suisse has received investment banking related compensation from the subject company (BABA.N, FB.OQ, 3888.HK, CYOU.OQ, SOHU.OQ,
WUBA.N, BITA.N) within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (BIDU.OQ, BABA.N,
AMZN.OQ, FB.OQ, NFLX.OQ, NTES.OQ, 3888.HK, CYOU.OQ, SOHU.OQ, WUBA.N, BITA.N) within the next 3 months.
As of the date of this report, Credit Suisse makes a market in the following subject companies (AMZN.OQ, FB.OQ, NFLX.OQ, SOHU.OQ,
GOOGL.OQ).
As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (3888.HK).
Credit Suisse beneficially holds >0.5% long position of the total issued share capital of the subject company (GOOGL.OQ).
Credit Suisse has a material conflict of interest with the subject company (BABA.N) . Credit Suisse acted as the exclusive financial advisor to Alibaba
Group in relation to its investment in Snapdeal.com. Credit Suisse is the financial advisor to Alibaba Group Holding Limited’s acquisition of a
controlling stake in Lazada Group S.A.”
Credit Suisse has a material conflict of interest with the subject company (FB.OQ) . Credit Suisse has been named as a defendant in various
putative shareholder class-action lawsuits relating to Facebook, Inc.’s May 2012 initial public offering. Credit Suisse’s practice is not to comment in
research reports on pending litigations to which it is a party. Nothing in this report should be construed as an opinion on the merits or potential
outcome of the lawsuits.
Credit Suisse has a material conflict of interest with the subject company (BITA.N) . Credit Suisse is acting as financial advisor to Bitauto Holdings
Ltd in relation to the investments by JD.com, Inc and Tencent Holdings Ltd in Bitauto.
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For a history of recommendations for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to
https://rave.credit-suisse.com/disclosures/view/report?i=237072&v=2o2mvbt2jdrlg9en7aayicfby .
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This research report is authored by:
Credit Suisse (Hong Kong) Limited ....................................................................................................................................... Evan Zhou ; Zoe Zhao
To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important
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Credit Suisse (Hong Kong) Limited ....................................................................................................................................... Evan Zhou ; Zoe Zhao
For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.creditsuisse.com/disclosures or call +1 (877) 291-2683.
Tencent Holdings
(0700.HK / 700 HK)
33
20 July 2016
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Tencent Holdings
(0700.HK / 700 HK)
IT0388.doc
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