Research from Quam Securities, Quam Securities

Quam Securities Research

Research from Quam Securities

Quam Securities

Since its inception in 1986, Quam Securities Limited (Quam Securities) has grown to become one of the few mid-tier securities brokerages in Hong Kong with global execution capabilities for both private and institutional clients. It boasts a well-established network in Greater China including Taiwan and in major world markets through the Global Alliance Partners (GAP). Quam Securities is well-positioned not only to harness and drive business within the China Tonghai International Financial Limited but also between China and the world markets.

Equity Bottom-Up

Tencent Holdings (ADR) / Equity Bottom-Up

<ul><li>The HSI closed at 24,271, up 59 pts or 0.25%, with main board turnover totaling HKD162.6bn, supported by optimism over Beijing’s efforts to stabilize the mainland stock market and developments in China’s technology sector.</li><li>Investor attention centered on Tencent Holdings, which planned to issue senior unsecured bonds denominated in US dollars and offshore yuan, with maturities potentially ranging from 10 to 30 years.</li><li>Meanwhile, reports of shareholder disputes involving AI startup Moonshot AI ahead of its planned Hong Kong IPO raised concerns over corporate governance and disclosure.</li></ul>

The HSI closed at 24,271, up 59 pts or 0.25%, with main board turnover totaling HKD162.6bn, supported by optimism over Beijing’s efforts to stabilize the mainland stock market and developments in China’s technology sector.Investor attention centered on Tencent Holdings, which planned to issue senior unsecured bonds denominated in US dollars and offshore yuan, with maturities potentially ranging from 10 to 30 years.Meanwhile, reports of shareholder disputes involving AI startup Moonshot AI ahead of its planned Hong Kong IPO raised concerns over corporate governance and disclosure.

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Tencent announced 2Q26 results: total revenue was up by 11% YoY to RMB204.8bn, 1% ahead of Visible Alpha (VA) consensus estimate, mainly thanks to the solid growth of marketing and games businesses; non-IFRS operating profit grew by 9% YoY to RMB75.6bn, 1% ahead of the consensus estimate; excluding new AI products investment, non-IFRS operating profit increased by 19% YoY to RMB86.1bn, demonstrating resilience of Tencent’s core businesses.</li><li>Free cash flow also remained healthy at RMB37.6bn if excluding prepayments for compute procurement, though total capex was up by 176% YoY to RMB52.8bn in 2Q26.</li><li>We slightly lower our FY26-28E earnings forecasts by 0-1% in view of the greater-than-expected capex, and trim our SOTP-derived target price to HK$705.0 (previous: HK$735.0 based on SOTP valuation). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent announced 2Q26 results: total revenue was up by 11% YoY to RMB204.8bn, 1% ahead of Visible Alpha (VA) consensus estimate, mainly thanks to the solid growth of marketing and games businesses; non-IFRS operating profit grew by 9% YoY to RMB75.6bn, 1% ahead of the consensus estimate; excluding new AI products investment, non-IFRS operating profit increased by 19% YoY to RMB86.1bn, demonstrating resilience of Tencent’s core businesses.Free cash flow also remained healthy at RMB37.6bn if excluding prepayments for compute procurement, though total capex was up by 176% YoY to RMB52.8bn in 2Q26.We slightly lower our FY26-28E earnings forecasts by 0-1% in view of the greater-than-expected capex, and trim our SOTP-derived target price to HK$705.0 (previous: HK$735.0 based on SOTP valuation). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent (700 HK) - Solid 2Q26 Results; Gradually Capturing AI Benefits in the Long Run

<ul><li>Tencent will report 2Q26E results on 12 Aug: we expect total revenue to increase by 9% YoY to RMB201.3bn, driven by the solid growth of games and marketing businesses; we estimate non-IFRS net income to grow by 7% YoY to RMB67.3bn, with non-IFRS NPM down by 0.7ppts YoY mainly due to AI-related investment.</li><li>Overall, we slightly trim our FY26 non-IFRS net income forecast by 1% in view of the AI investment.</li><li>That said, we remain upbeat on the ROI of Tencent’s AI spend, proven by its enhancing HY model performance, accelerating cloud revenue growth and improving ad solutions. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent will report 2Q26E results on 12 Aug: we expect total revenue to increase by 9% YoY to RMB201.3bn, driven by the solid growth of games and marketing businesses; we estimate non-IFRS net income to grow by 7% YoY to RMB67.3bn, with non-IFRS NPM down by 0.7ppts YoY mainly due to AI-related investment.Overall, we slightly trim our FY26 non-IFRS net income forecast by 1% in view of the AI investment.That said, we remain upbeat on the ROI of Tencent’s AI spend, proven by its enhancing HY model performance, accelerating cloud revenue growth and improving ad solutions. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent (700 HK) - Solid Core Business Growth; Investing to Accelerate AI Development

<ul><li>Tencent reported 1Q26 results: total revenue grew by 9% YoY to RMB196.5bn, 1.5% below Bloomberg consensus estimate, as the later timing of the 2026 Spring Festival led to less revenue recognition for games business in 1Q26; non-IFRS operating income increased by 9% YoY to RMB75.6bn, largely in line with the consensus and our estimate.</li><li>Non-IFRS operating profit excluding new AI product investment grew by 17% YoY to RMB84.4bn, which in our view demonstrates Tencent’s strong operating leverage and capability to maintain steady earnings growth despite stepped-up AI investment.</li><li>The quarterly earnings impact from AI investment (c.RMB9bn) is also in line with management’s previous guidance (&gt;RMB36bn investment in FY26E). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent reported 1Q26 results: total revenue grew by 9% YoY to RMB196.5bn, 1.5% below Bloomberg consensus estimate, as the later timing of the 2026 Spring Festival led to less revenue recognition for games business in 1Q26; non-IFRS operating income increased by 9% YoY to RMB75.6bn, largely in line with the consensus and our estimate.Non-IFRS operating profit excluding new AI product investment grew by 17% YoY to RMB84.4bn, which in our view demonstrates Tencent’s strong operating leverage and capability to maintain steady earnings growth despite stepped-up AI investment.The quarterly earnings impact from AI investment (c.RMB9bn) is also in line with management’s previous guidance (&gt;RMB36bn investment in FY26E). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent (700 HK) - Resilient 1Q26 Earnings Growth Despite AI Investment; Solid AI Progress

<ul><li>Tencent announced in-line 4Q25 results: total revenue increased by 13% YoY to RMB194.4bn, and non-IFRS operating income was up by 17% YoY to RMB69.5bn, both in line with Bloomberg consensus estimates.</li><li>FY25 total revenue/non-IFRS operating income grew by 14%/18% YoY.</li><li>FY26 will be a key investment year for Tencent AI, and management expected to more than double the investment in new AI products in FY26 (&gt;RMB36bn). T</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent announced in-line 4Q25 results: total revenue increased by 13% YoY to RMB194.4bn, and non-IFRS operating income was up by 17% YoY to RMB69.5bn, both in line with Bloomberg consensus estimates.FY25 total revenue/non-IFRS operating income grew by 14%/18% YoY.FY26 will be a key investment year for Tencent AI, and management expected to more than double the investment in new AI products in FY26 (&gt;RMB36bn). TContent is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Tencent (700 HK) - Inline 4Q25 Results; Increasing AI Investment to Solidify Competitive Moat

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

Quam Morning Note (13 Oct)

The HSI closed at 24,271, up 59 pts or 0.25%, with main board turnover totaling HKD162.6bn, supported by optimism over Beijing’s efforts to...

Quam Securities

Tencent (700 HK) - Solid 2Q26 Results; Gradually Capturing AI Benefits in the Long Run

Free cash flow also remained healthy at RMB37.6bn if excluding prepayments for compute procurement, though total capex was up by 176% YoY to...

CMB International

Tencent (700 HK) - Solid Core Business Growth; Investing to Accelerate AI Development

Tencent will report 2Q26E results on 12 Aug: we expect total revenue to increase by 9% YoY to RMB201.3bn, driven by the solid growth of games and...

CMB International

Tencent (700 HK) - Resilient 1Q26 Earnings Growth Despite AI Investment; Solid AI Progress

The quarterly earnings impact from AI investment (c.RMB9bn) is also in line with management’s previous guidance (>RMB36bn investment in FY26E).

CMB International

Tencent (700 HK) - Inline 4Q25 Results; Increasing AI Investment to Solidify Competitive Moat

Tencent announced in-line 4Q25 results: total revenue increased by 13% YoY to RMB194.4bn, and non-IFRS operating income was up by 17% YoY to RMB69.5bn

CMB International

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