Tencent made a huge quarterly profits, but investors are cautious
In the last quarter of last year, Chinese tech company Tencent significantly increased sales and profits, but failed to address investor concerns. Not only is the growth of the game branch, fueled by the demand for entertainment during lockdowns in different countries, fading, but there are also concerns that the Chinese government wants to tackle Tencent.
Tencent, known for the chat app WeChat and games such as PUBG Mobile, is also active in the fintech industry. The Chinese government already addressed Alibaba, another internet giant, and now seems to have Tencent in their sights. As a result, more than $ 140 billion in stock market value has evaporated since January. In addition, the Chinese government also indicated that it wanted to tackle game addiction.
Tencent paid little attention to this in his annual report. The company stated that it only wanted to work with the Chinese government on fintech regulation and tackling gambling addiction.
If China really wants to tackle so-called platform companies, this can be very unfavorable for Tencent. Chat service WeChat is the basis for all services. Mini-apps within that service can, for example, allow to play games, buy things, borrow money and make payments. Partly because of this, there is not one fintech department at the company but there are fintech services at different branches. This could be difficult if Beijing wants Tencent to remote fintech services.
In the short term, investors mainly look at what the company can do to keep the growth rate high. In the closing quarter of 2020, revenue increased by 26 percent to 133.7 billion yuan, about 17.3 billion euros. In the game branch, revenue growth was 29 percent, the lowest level of the year.
Below the line, a profit of 59.3 billion yuan remained at all Tencent. More than half of these came from one-off benefits.