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Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Results Deteriorating As Distractions Mount: Tencent Holdings’ (700.HK) [Tencent] 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) on a linked quarter basis – and were of poor quality. Results were challenged by the following: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged; and     *Elephants In The Room: Mainland China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". We have already witnessed fines at Tencent, new user WeChat suspensions,  and Tencent may have to give up its exclusive music rights and possibly dispose of Kuwo and Kugou. Further, there no doubt that Tencent will also follow Alibaba Group (BABA.US) [Alibaba] in their formation of a financial holding company. Its pretty surprising that Tencent refuses to discuss these matters.

*Results Deteriorating As Distractions Mount: Tencent Holdings’ (700.HK) [Tencent] 2Q21 GAAP net income declined CNY 5.2 bn (10.8%) on a linked quarter basis – and were of poor quality. Results were challenged by the following: cost of revenue increase; operating expense increase; losses in associates; higher impairment charges; and weaker online games. Were it not for the artificially lower tax rate, results would have been even more challenged; and     *Elephants In The Room: Mainland China's crackdown on capital markets has rapidly expanded under the broad narrative of "financial stability". We have already witnessed fines at Tencent, new user WeChat suspensions,  and Tencent may have to give up its exclusive music rights and possibly dispose of Kuwo and Kugou. Further, there no doubt that Tencent will also follow Alibaba Group (BABA.US) [Alibaba] in their formation of a financial holding company. Its pretty surprising that Tencent refuses to discuss these matters.   

Tencent

Tencent Holdings – Pig Piling