A Tencent sign is seen in Jiaxing, Zhejiang province, China. Picture: REUTERS
A Tencent sign is seen in Jiaxing, Zhejiang province, China. Picture: REUTERS

Hong Kong — Tencent Holdings’s investments in video and gaming content are paying off in a big way.

China’s largest internet company, in which Naspers owns a 34% interest, posted record quarterly sales and profit that topped all analysts’ estimates as blockbuster titles including Honour of Kings drove a billion-plus users on WeChat and QQ to spend on game items.

Chairman Pony Ma’s strategy of stockpiling rights to hit anime and novels and developing shows in-house is transforming the company into a hybrid Marvel Studios-Netflix style content factory.

Soaring growth at Tencent’s mobile gaming and advertisement units is buying the company time to develop new channels of revenue in finance and cloud, and bankrolling a foray into Hollywood. After backing Kong: Skull Island, the company is helping finance the coming Wonder Woman.

A market value that now surpasses $300bn underscores how China’s online titans, including Alibaba, are outstripping traditional state sectors and defying a slowdown in the Chinese economy.

"It was a strong set of results," said Li Yujie, an analyst at RHB Research Institute in Hong Kong. "Tencent’s mobile gaming business was the main contributor, especially Honour of Kings, which is probably generating
[between] 2-billion and 3-billion yuan of revenue a month."

Revenue rose to 49.6-billion yuan ($7.2bn) in the Marcg quarter, the Shenzhen-based company said on Wednesday, surpassing the 46.4-billion yuan analysts projected on average.

Net income climbed to 14.5-billion yuan, compared with a projected 13-billion yuan. The results included "net other gains" of 3.2-billion yuan — six times more than it recorded a year earlier — which was mainly from disposals and dividend income, it said.

Shifting from its old strategy of relying on third-party content, Tencent has poured money into developing its own videos.

In games, Tencent rode a strong showing from Honour of Kings. Self-developed, the hit battle title is in the same vein as the world’s most popular desktop title, League of Legends — also owned by Tencent. It topped revenue and downloads in Apple’s iOS store in March, according to App Annie.

Shifting from its old strategy of relying on third-party content, Tencent has poured money into developing its own videos.

The company is now also backing Twitch-like streaming sites including Wuhan Douyu Network Technology and is accelerating investments in Hollywood films.

Tencent’s share price edged 0.4% higher before the earnings were announced.

The stock has gained 37% in 2017, compared with a 41% rise for New York-listed rival Alibaba. Naspers was 2% higher in mid-afternoon trade in Johannesburg.

WeChat had 937.8-million monthly active users and the mobile version of QQ had 678-million users at the end of the quarter. Revenue from Value Added Services, which includes online games and messaging, soared 41% to 35.1-billion yuan. Online game revenue grew 34% to 22.8-billion yuan.

Bloomberg

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