Blue Lotus Non US Internet research, Blue Lotus Research Institute

Ying Pan

Blue Lotus Non US Internet research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>Tencent reported C4Q24 revenue, IFRS op. profit, and IFRS net income in-line, (5.3%), 6.0% vs. our est. and 2.1%, (12.6%), 5.3% vs. cons. </li>
<li>We shifted our game TOP PICK from Tencent to NetEase on January 16 2025, due to pipeline gaps. </li>
<li>We reiterate our BUY rating and raise TP to HK$545 on Tencent. We expect game pipeline to fill the gap with the launch of two blockbusters in C3Q25.</li>
</ul>


Tencent reported C4Q24 revenue, IFRS op. profit, and IFRS net income in-line, (5.3%), 6.0% vs. our est. and 2.1%, (12.6%), 5.3% vs. cons. 
We shifted our game TOP PICK from Tencent to NetEase on January 16 2025, due to pipeline gaps. 
We reiterate our BUY rating and raise TP to HK$545 on Tencent. We expect game pipeline to fill the gap with the launch of two blockbusters in C3Q25.


[Tencent (700 HK, BUY, TP HK$545) Target Price Change]: C4Q24 Review: Good Time to Pick up Shares

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 4Q24 financial results: total revenue grew by 11% YoY to RMB172.4bn, 3/2% ahead of our/Bloomberg consensus estimates, mainly due to better-than-expected growth of games &amp; marketing revenue.</li><li>During the period, non-IFRS net income was up by 30% YoY to RMB55.3bn, in line with our estimate; but net margin is slightly below our estimate, due to the increased R&amp;D expenses including staff costs and depreciation expenses related to AI investment.</li><li>Tencent plans to further step up AI investment in FY25 (RMB80- 100bn capex with more R&amp;D and marketing support to AI), which may drag the pace of margin expansion but unlock long-term growth opportunities of AI cloud, marketing and games businesses in our view. </li></ul><p><em>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.</em></p>

Tencent announced 4Q24 financial results: total revenue grew by 11% YoY to RMB172.4bn, 3/2% ahead of our/Bloomberg consensus estimates, mainly due to better-than-expected growth of games &amp; marketing revenue.During the period, non-IFRS net income was up by 30% YoY to RMB55.3bn, in line with our estimate; but net margin is slightly below our estimate, due to the increased R&amp;D expenses including staff costs and depreciation expenses related to AI investment.Tencent plans to further step up AI investment in FY25 (RMB80- 100bn capex with more R&amp;D and marketing support to AI), which may drag the pace of margin expansion but unlock long-term growth opportunities of AI cloud, marketing and games businesses in our view. 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) - Stepping up AI Investment to Unleash Growth Opportunities

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>The U.S. Department of Defense has designated <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> as a Chinese Military Company. <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd-69366efb-cf6b-404d-a0e4-c6b9b2e128dc" target="_blank" data-smartkarma-citation="entities:17:1" rel="noopener">Tencent Holdings (ADR) (TCEHY US)</a> shares were down nearly 8% overnight.</li>
<li>There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.</li>
<li>If added to the NS-CMIC list, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> will be deleted from global indexes and there will be HUGE passive selling from these trackers.</li>
</ul>


The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.


Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

Overseas Chinese Equities, Aequitas Research

Ming Lu

Overseas Chinese Equities

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>The growth rate of total revenue came back to two digits in 4Q24.</li>
<li>The growth rate of game revenue reached 20% YoY in 4Q24.</li>
<li>The gross margins of all business lines improved YoY in 4Q24.</li>
</ul>


The growth rate of total revenue came back to two digits in 4Q24.
The growth rate of game revenue reached 20% YoY in 4Q24.
The gross margins of all business lines improved YoY in 4Q24.


Tencent (700 HK): 4Q24, Revenue Growth Back to Two Digits

Equity Derivatives and Volatility Specialist, Clifton Derivatives

John Ley

Equity Derivatives and Volatility Specialist

Clifton Derivatives

Independent derivative and volatility research firm focusing on events/catalysts, earnings, relative value and cross asset volatility strategies.

Equity Derivatives

<ul>
<li>We take a detailed look at the implied earnings move priced into Tencent options compared to historical outcomes.</li>
<li>Post-Earnings price movements are analyzed to assess directional tendencies and magnitude based on earnings beats and misses.</li>
<li>An interesting post-earnings pattern emerges, with an options strategy outlined.</li>
</ul>


We take a detailed look at the implied earnings move priced into Tencent options compared to historical outcomes.
Post-Earnings price movements are analyzed to assess directional tendencies and magnitude based on earnings beats and misses.
An interesting post-earnings pattern emerges, with an options strategy outlined.


Tencent Earnings: Implied Vs Realized Price Changes and a Post Earnings Pattern

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 (700 HK)

[Tencent (700 HK, BUY, TP HK$545) Target Price Change]: C4Q24 Review: Good Time to Pick up Shares

Tencent reports solid financials, but game pipeline concerns lead to shift in top pick to NetEase. Analysts maintain BUY rating and raise target...

Blue Lotus Research Institute

Tencent (700 HK) - Stepping up AI Investment to Unleash Growth Opportunities

We lift our FY25-26E total revenue forecast by 1%, and raise our SOTP-derived TP to HK$625.0 (previous: HK$525.0) given the rerating of several...

CMB International

Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

The U.S. DoD has designated Tencent as a Chinese Military Company. The stock is not on the NS-CMIC list yet and could be added later. Addition to...

Brian Freitas

Tencent (700 HK): 4Q24, Revenue Growth Back to Two Digits

The growth rate of total revenue came back to two digits in 4Q24. The growth rate of game revenue reached 20% YoY in 4Q24. The gross margins of all...

Ming Lu

Tencent Earnings: Implied Vs Realized Price Changes and a Post Earnings Pattern

Analysis of Tencent options shows implied earnings move compared to historical outcomes, revealing post-earnings patterns and a potential options...

John Ley

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[Tencent (700 HK, BUY, TP HK$545) Target Price Change]: C4Q24 Review: Good Time to Pick up Shares

​Tencent reports solid financials, but game pipeline concerns lead to shift in top pick to NetEase. Analysts maintain BUY rating and raise target...

Blue Lotus Research Institute

Tencent (700 HK) - Stepping up AI Investment to Unleash Growth Opportunities

We lift our FY25-26E total revenue forecast by 1%, and raise our SOTP-derived TP to HK$625.0 (previous: HK$525.0) given the rerating of several...

CMB International

Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

The U.S. DoD has designated Tencent as a Chinese Military Company. The stock is not on the NS-CMIC list yet and could be added later. Addition to...

Brian Freitas

Tencent (700 HK): 4Q24, Revenue Growth Back to Two Digits

The growth rate of total revenue came back to two digits in 4Q24. The growth rate of game revenue reached 20% YoY in 4Q24. The gross margins of all...

Ming Lu

Tencent Earnings: Implied Vs Realized Price Changes and a Post Earnings Pattern

​Analysis of Tencent options shows implied earnings move compared to historical outcomes, revealing post-earnings patterns and a potential options...

John Ley

Tencent reports solid financials, but game pipeline concerns lead to shift in top pick to NetEase. Analysts maintain BUY rating and raise target...

Analysis of Tencent options shows implied earnings move compared to historical outcomes, revealing post-earnings patterns and a potential options...