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The market value of Tencent's foreign investment has exceeded one trillion yuan, and the target price of Tencent has been raised to HK $650

via:CnBeta     time:2020/8/1 16:13:44     readed:112

According to the latest research report of CITIC Securities, Tencent is one of the most valuable companies in the current Chinese market.With the continuous sound of byte beating and listing, the IPO of ant financial services under Alibaba has been steadily advancing. Tencent, the leading Internet player in China, is facing increasing challenges from its rivals. However, the view of the institution is not pessimistic.

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According to the latest research report of CITIC Securities, Tencent is one of the most valuable companies in the current Chinese market. Since this year, Tencent's share price has risen 41%, reflecting its better than expected performance (4.5%) and valuation improvement (35%). Considering the company's profit improvement, 2b business opening up growth space and investment business value growth, Tencent raised the target price of Tencent holdings to HK $650, maintaining the company's "buy" rating.

At the close of July 31, Tencent Holdings (0700. HK) closed at HK $534, with the latest market value of more than HK $5 trillion. At the same time, Shanghai Shenzhen Hong Kong stock connect's southward capital has increased its holdings by 28 million shares since July, net buying HK $14.4 billion, and its shareholding ratio has risen from 2.88% at the beginning of July to 3.17% at the end of the month, while Tencent's share price has also risen by 7.1% since July.

User traffic stabilizes and rebounds

Tencent's share of domestic user traffic rebounded slowly after bottoming out in 2019q2, rebounded to 43% in 2020q1, up 1% month on month. In 2020q1, wechat Mau reached 1.203 billion, with a year-on-year growth of 8.2% and a month on month growth of 3.2%. QQ (mobile) Mau reached 694 million, with daily active users of small programs exceeding 400 million and "video Number" dau exceeding 200 million.

CITIC Securities pointed out that the market's confidence in Tencent's social and game base has gradually recovered. The company has a steady growth in games, advertising, finance and other businesses, with strong performance certainty and growth. After the outbreak of the epidemic, Tencent conference and enterprise wechat became new popular applications. Although they failed to reflect their contributions in the profit statement, they were expected to open up new space in terms of user duration and future valuation. In addition, the company recently launched a wechat store to explore the e-commerce field, which also helps improve the stickiness and duration of wechat users.

In fact, Tencent has made a lot of investment in various fields in recent years.

According to the official website of Tencent investment, as of January this year, Tencent has invested more than 800 companies, of which more than 70 have been listed, and more than 160 are leading companies with a market value or valuation of more than $1 billion.

Target price HK $650

The latest is the acquisition of SOGO. On the evening of July 27, Sogou (SOGO. N) announced that it had received an offer from Tencent. Tencent intended to purchase the remaining shares of Sogou in cash at a price of $9 per share.

Before the privatization plan was announced, Tencent was the single largest investor in Sogou: Sogou is the second largest search engine company in China. Besides search engine, its Sogou browser, Sogou input method and other products also have a large number of users.

In November 2017, Sogou entered the U.S. stock market at a price of $13 per share. As early as September 2013, Tencent injected $448 million into Sogou, and incorporated its Tencent search business and other related assets into Sogou. Before the announcement of the privatization plan, Tencent was the single largest shareholder with a shareholding ratio of 38.7%.

Huajin Securities believes that, on the one hand, the competition in the advertising market is fierce, and other forms of advertising are more efficient and more accepted by consumers than search advertising. On the other hand, Tencent, Alibaba and byte have successfully built content and service ecology, and have provided connections through their respective search engines, and gradually have the ability to realize closed-loop trading within the system. At present, the revenue from search and search related advertising accounts for a very low proportion in Tencent's advertising market. With the popularity of wechat search and the integration of Sogou technology and business team, the commercialization potential of wechat will be further released.

UBS research also pointed out that the acquisition of Sogou could bring upward space for Tencent. "Buy" rating with a target price of HK $650. UBS said Sogou provided Tencent with external Internet search results and believed Tencent could integrate and improve its products, especially wechat search, and improve advertising profitability after the acquisition. The acquisition will promote Tencent's e-commerce and short video businesses in the future. Although its immediate financial contribution to Tencent is limited, it is believed that there will be great potential in the future.

It is worth mentioning that Tencent's investment has been fierce recently. On the evening of July 26, pan micro network announced that Tencent industrial fund transferred 5% equity of Pan micro network held by shareholder Wei Jinkun with 771 million yuan to lay out cloud computing and software fields. On the evening of July 27, Tencent industry fund raised its brand of century Huatong plus code game. Tencent's investment in Pan micro network and century Huatong has reached nearly 1 billion yuan 。 In addition, Tencent also holds shares in new retail assets such as Bubugao and Yonghui supermarket in A-share, which should pave the way for the commercialization of wechat.

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