China's Tencent reports record net profit

Posted on 2010-05-16 21:37:19 BJT, by

Q1 net profit 1.78 bln yuan, vs 1.58 bln yuan consensus * Q1 revenue up 68.8 percent * Sees weaker seasonality in Q2 for online games * Shares closed 1.88 percent lower before results(Adds analyst quote) SHANGHAI, May 12 (Reuters) - Tencent Holdings (0700.HK),

* Q1 net profit 1.78 bln yuan, vs 1.58 bln yuan consensus * Q1 revenue up 68.8 percent * Sees weaker seasonality in Q2 for online games * Shares closed 1.88 percent lower before results(Adds analyst quote) SHANGHAI, May 12 (Reuters) - Tencent Holdings (0700.HK),

China's biggest Internet company, reported another quarter of record profit on the back of a robust performance in its gaming and internet value-added services (IVAS) business. Tencent, which runs hit online games such as Dungeon & Fighter and Cross Fire, said it saw weaker seasonality in the second quarter for its IVAS business, citing fewer holidays in the period and students' exams. The company, China's largest online game operator and instant messaging platform, reported 90.8 percent growth in revenue from online games. IVAS revenue totaled 3.39 billion yuan for the quarter. "There is only two companies in the whole online gaming space that will actually game market share this year, that is Tencent and Netease," said Jin Yoon, an analyst with Nomura Securities. "The pie may not be growing as fast but the person eating into it will be Tencent," Jin said. Last month, Tencent paid $300 million for 10 percent of Digital Sky Technologies, an investor in the Russian equivalent of Facebook, which also recently purchased chat messaging platform ICQ from Time Warner (TWX.N). [ID:nLDE62926B] Tencent's ambitions to expand overseas comes as China's online game market becomes more cutthroat, with companies churning out similar games, jockeying for the attention of an audience whose tastes are becoming more sophisticated. "The second quarter will be a weaker season for our IVAS business, but it will present stronger seasonality for our online advertising business," Chief Executive Pony Ma said in a statement.

For StarMine comparative data: r.reuters.com/cuz63k For a graphic on Tencent's share price:

Online game revenue in China rose more than 40 percent in the first quarter to 7.82 billion yuan, said Beijing-based Analysys International. Tencent, whose penguin logo is basically synonymous with the internet in China, had a quarter of the market, followed by Shanda Games (GAME.O) with 21 percent and NetEase.com (NTES.O) with 15.7 percent. Co-founded and led by media-shy Ma, who refers to himself as the company's "chief experience officer", Tencent's Hong Kong-listed shares more than tripled last year. Tencent said net profit rose to 1.78 billion yuan in the first quarter, from 1.035 billion yuan a year earlier, beating an average forecast of 1.58 billion yuan from a poll of three analysts by Thomson Reuters I/B/E/S. Revenue rose 68.8 percent to 4.23 billion yuan, beating the average forecast of 3.91 billion yuan. IVAS contributed most of Tencent's total revenue, online advertising contributing 4.8 percent and mobile services 14.6 percent. China has the world's largest Internet market by users with more than 400 million netizens. There were 60-70 million online gamers at end-2009, government statistics showed. Shares of Tencent, which is more than 30 percent owned by Africa's biggest media group Naspers (NPNJn.J), are down about 10.1 percent this year versus a 7.6 percent fall in the broader Hong Kong market .HSI. ($1 = 6.825 Yuan)

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