Can Tencent continue to buy back HK $400 million?


Can Tencent continue to buy back HK $400 million?

Author: Duan Qian Qian

Whether it is the best opportunity to copy the bottom of Tencent is still difficult to judge, but Tencent has been 12 consecutive trading days to buy back shares.

In 2017, Tencent ushered in the high light Market in the capital market. Its market value was the highest when it exceeded 4 trillion Hong Kong dollars.

Tencent once overtook Alibaba by market capitalisation compared with its domestic rivals and, at one point, overtook Facebook on the other side of the ocean as the world's fifth-largest company by market capitalisation compared with overseas giants.

The height is not cold. Tencent's market value myth did not last too long. In 2018, the market value of Tencent began to shrink, and outside ridicule evaporated the "two Baidu".

Tencent's share price closed at HK$327.8 on September 24, unlike the high of HK$475 at the beginning of the year. The latest Tencent market value is only HK $3 trillion and 100 billion, which shrank by 3 compared with the peak value of HK $4 trillion and 500 billion.

After entering the 2018, Tencent is facing a troubled time and is facing internal and external worries. Secondary market is the intuitive embodiment of macro-economy, an insurmountable background is the escalation of Sino-US trade friction; moreover, the new economy has been listed in Hong Kong, there are millet, China Tower, the United States Troupe and other giant enterprises on the market to form a diversion of funds; return to Tencent itself, the cash cow business is facing a stop issue, incremental travel. Consideration of drama can not be realized.

According to Tencent 2018Q2 earnings report, Tencent single quarter net profit has declined for the first time in 13 years. In terms of games, Tencent's hand-travel revenue increased 19% year-on-year, and dropped 19% to 17.6 billion yuan in the ring, while its end-travel revenue fell 5% year-on-year and 8% to 12.9 billion yuan in the ring.

Naspers, a major shareholder of Tencent, made a decision to reduce Tencent shares early this year. Naspers2001 invested in Tencent and rescued Tencent from the brink of extinction. After Tencent went public in 2004, Naspers boards had to face shareholder pressure to reduce their holdings in Tencent. Almost every time, the CEO of Naspers would say that it's not time to cut Tencent's holdings, which haven't wavered for 17 years. Until March 2018, Naspers announced that it had decided to reduce Tencent's 2% share.

Tencent is facing a lot of bad news. The outside world also began to question the investment company's "no dreams" and the loss of innovation. There's a joke on the internet: If you look only at friends'comments, you'll think Tencent is about to go bankrupt - Tencent has faced too much controversy in the past six months.

In fact, after 20 years of development, Tencent's revenue in the first half of 2018 was still up 39%, to 147.203 billion yuan. In terms of social accounts activity, WeChat has more than 1 billion monthly active accounts.

On Sept. 7, Tencent launched its first share repurchase since 2018 and has been buying back shares for 12 consecutive trading days. Apart from 22,700 shares on Sept. 7 and 71,000 on Sept. 14, Tencent repurchased between 110,000 and 130,000 shares a day on the remaining 10 trading days. In the past 12 trading days, Tencent has repurchased 1 million 313 thousand shares, which cost about HK $420 million.

In terms of closing price of HK $327.80 in September 24th, Tencent's P / E ratio is 32.29 times.

2018 is crucial for Tencent. This year Tencent began to attack the B-end market again, President Liu Chiping said that he did not believe that Tencent did not have to B gene.

The "other" business appearing in Tencent's earnings report is the fastest growing business of Tencent in the past two years, mainly including cloud and payment, which is the main tool of Tencent's B-end market. Alibaba may have a leading edge, but this time, Tencent is not fighting with bare hands. Under some scenes online, WeChat pays more than Alipay.

Repurchase actions may not stop the downward trend of stocks, but at least they highlight management confidence in the company.


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