HONG KONG • Tencent Holdings shares yesterday rose to a record high after it posted accelerated sales growth and topped the most optimistic of analyst estimates.
The shares climbed 2.3 per cent to a lifetime closing peak of HK$391.80 in Hong Kong, valuing the company at more than S$649 billion.
The owner of WeChat, the social network that is nearly ubiquitous in China, reported a 61 per cent rise in third-quarter sales on Wednesday.
Fuelled by advertising and hit game Honour Of Kings, the growth was the fastest since 2010, when revenue was a mere 7 per cent of its current level.
By getting WeChat onto almost a billion smartphones in China, Tencent has leveraged the instant message service into an entertainment and gaming platform that is driving advertising sales. Although the Shenzhen-based company remains largely absent overseas, it has built a 12 per cent stake in Snapchat owner Snap and is exploring new sources of growth in cloud and financial services, movies and music.
"We don't see any signs of slow-down or deterioration for the next quarter or 2018," said analyst Naoshi Nema of Cantor Fitzgerald in Hong Kong.
"Mobile games growth is strong and the company is hitting pay dirt in the areas of payments, cloud and on-demand video subscription."
Tencent Holdings' rise in third-quarter sales.
Sales for the quarter were 65.2 billion yuan (S$13.3 billion), compared with analyst expectations for 61 billion yuan.
Net income surged 69 per cent to 18 billion yuan, also blowing past projections for 15.8 billion yuan.
WeChat had 980 million monthly active users, up almost 16 per cent from the previous year, and now sending 38 billion messages daily.
But the mobile version of QQ, Tencent's other mainstay social network, had 2.5 per cent fewer users at the end of the quarter.
The success of Honour Of Kings helped expand smartphone gaming revenue by 84 per cent in the period. While the game was recently dethroned from the top of China's iOS store, Tencent has a full pipeline of titles next year that includes several from South Korean developers that were held back amid political tensions with China.
The company's first two survival games, Glorious Mission and Crossfire, have each had more than 20 million pre-registrations, with the Deserted Island title set to launch later this month.
Earlier this year, investors bet that some of the company's boldest investments would finally pan out, adding about US$230 billion (S$312 billion) of market value and creating one of the world's most richly valued companies.
While it is unclear what plans the firm has for its chunk of Snap, the acquisition comes after a failed attempt to pick up WhatsApp and may mark a renewed effort to feel out markets beyond its home turf.
"Over time, we'll see whether we can do something more strategic," Tencent president Martin Lau said in a conference call.
While Tencent is said to be preparing its music arm for an initial public offering that could raise at least US$1 billion next year, Mr Lau sees value in keeping many of the businesses integrated with the firm. "I don't think spin-offs are going to be a norm for us going forward," he said.