China’s biggest Internet firm Tencent Holdings Ltd saw its fourth quarter profit surge 12.9 percent, which was however its slowest growth in quarterly profit as its spent huge sums of money to promote its e-commerce platforms and mobile messaging app WeChat.
Net income in the fourth quarter rose to 3.91 billion yuan ($631 million), while revenues surged 40 percent to 16.97 billion yuan. Selling and advertising costs rose 39 percent from the previous quarter as the company moved to raise awareness of its WeChat, e-commerce and gaming platforms.
“Tencent’s value is quite high, so splitting the shares would lower the entry barrier for investors,†said Ricky Lai, a Hong Kong-based analyst at Guotai Junan International Holdings. “This is good for the company. It means more individual investors will be willing to invest in the stock.â€
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Tencent’s Chairman Ma Huateng, who is China’s richest person, hopes to ride on the success of WeChat service, which has 355 million active monthly users, to claw back some market share from Baidu Inc. and Alibaba.
WeChat earned fourth-quarter revenue was within a range of 200 million to 300 million yuan ($32-$49 million). The company intends to shift the WeChat app’s model away from social networking to personal finances, gaming and even booking taxis. When lumped up together with the other app Mobile QQ, the two generated gaming revenue exceeding 600 million yuan.
“We have just started to monetise WeChat in the fourth quarter, so revenues won’t be too much,†said Tencent’s President Martin Lau.
The Shenzhen-based company plans to split its shares in order to increase the holdings held by individuals. Each investor will get one share for every five held. This plan is however subject to shareholders’ approval during the annual general meeting.
To contact the reporter of this story; Jonathan Millet at john@forexminute.com
