Chinese giant Tencent’s $108b rally has surprised even bullish analysts

A sticker featuring the logo of Tencent Holdings Ltd. is seen during a news conference in Hong Kong, China, on Thursday, March 21, 2019. Photographer: Justin Chin/Bloomberg

Tencent Holdings Ltd.’s analysts, who have a history of being too bullish, have now been caught off guard by a rally that’s gathering pace in Asia’s biggest stock.

Shares of the Chinese Internet giant are closing in on analysts’ consensus target price, something which hasn’t happened in nearly two years. It’s the most-loved stock in Hong Kong, as none of the 57 analyst ratings tracked by Bloomberg recommend selling the shares. Of the 50 bullish analysts, more than one-third have a 12-month price target that lags its current price.

Tencent Shares Back to Level Where Naspers Trimmed Stake in 2018

Tencent has jumped 27% since an October low, adding $108 billion to shareholder value. The share price topped HK$405 on Monday for the first time since 2018, the price at which its biggest shareholder sold about $10 billion worth of shares early that year. It was Hong Kong’s biggest-ever secondary offering at the time.

Tencent rose as much as 1.6% Tuesday to HK$413 before turning lower with the broader market. A series of block trades totaling almost 1 million shares crossed Tuesday morning at around HK$402, suggesting some shareholders are making the most of the rally to take profit. The stock is trading near the most overbought level since late 2017.

“The stock is rising partly due to a better earnings outlook,” said Kevin Tam, analyst at Core Pacific-Yamaichi International. “Its gaming product PUBG Mobile has done very well recently and there are some good signs for its new businesses.”

According to researcher Sensor Tower, revenue from PUBG Mobile was the world’s highest in December. The game garnered the second-most downloads globally last year. Tencent’s Call of Duty: Mobile made it into the top 10 for 2019, despite only being released in October.

Last week, Tencent announced new initiatives to further monetize its social-networking application Wechat, including the launch of more customized tools for users on the platform, according to CICC. “We expect short-term sentiment to rise on new initiatives but believe the actual impact will be limited,” analyst Natalie Yue wrote in a note.

These good signs came after a bearish quarter. The company’s profit plummeted 13% in the third quarter, missing the most-pessimistic analyst forecast, when an economic downturn depressed advertising and prompted charges within its huge portfolio of investments.

Bloomberg

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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