Foreign Freak-Out As Mainland Buys Hong Kong, Tencent Results Review

After the Hong Kong close, Tencent (700 HK, TCEHY US) reported Q1 financial results as revenue beat analyst expectations though adjusted net income and adjusted EPS missed. There were plenty of positives including revenue, net income, and EPS were strong year-over-year gains, international/non-China game revenue shined/+25% to RMB 13.2 billion, advertising revenue improved, and margins and cash flows were strong. Chairman and CEO Ma Huateng noted a “domestic consumption recovery” which drove the pick up in advertising and mobile payments. Quarterly revenue was the highest for the company ever. In the management call, Tencent noted President Xi’s April meeting and speech supportive of Chinese internet companies as evidenced by Tencent’s regular game approvals.

Revenue grew 11% to RMB 149.986 billion ($21.8 billion) from RMB 135.471 billion versus analyst expectations of RMB 146.286 billion