I have been vested in Tencent when the market cap was circa USD 200-250B and P/E 40-45, so my initial analysis is outdated. This includes my original Thesis:
Valuation:
Tencent has been growing top line at ~50% per year and bottom line at 30-40% per year in 2016. At a PE of 45 it had a forward P/E of 35 (assuming 30% bottom line growth), so it was a great entry price to me at that time.
As of the most recent quarter it has a market cap of 570B and a net profit of USD8.43B (TTM) USD10.8B (run rate). which translate to a trailing P/E of 68 and 53. So the entry price now is definitely not as attractive, but note that growth also accelerated (Top Line Growth: 61%; Bottom Line Growth: 67%). And don't discount the possibility that they may be sacrificing near term profitability to maximise growth like Amazon and Netflix.
Ref:
https://seekingalpha.com/news/3312573-te...al-content
Quality of Company:
Tencent, like Alibaba, is a sprawling conglomerate with many moving parts. So it is hard to give a summation of parts analysis for me, and others have done a better job.
IMO, at the core
Tencent has really cornered the technology sector in China (together with Alibaba). In terms of the IT sector (enterprise IT services, Cloud services), digital content delivery (games, digital download, digital content creation and streaming), social network (wechat, QQ etc.), become an integral part of Chinese commerce (Wechat pay), and Chinese life in general. They also own stakes in many important fledgling assets both in China (JD.com, Didi etc) and around the world (Go-Jek, Tesla etc.), which have potential of huge pay-offs (some already have).
There are much more hidden potential with Tencent that I cannot ever cover exhaustively (eg. I believe they will disrupt the Anime industry, which is exciting to me as a fan growing up).
And since Tencent operates in a protected market, has the deepest pocket in that market, with the most talent, has established their brand name, owns so many asset with huge network effect:
the technology sector (and increasingly, many traditional sectors like Financial Services, Media, Retail, Automobile, Logistics etc.) is just going to consolidate more among the big fishes (Tencent, Alibaba etc.).
Lastly, CEO Ma Huateng (Pony Ma) is a young visionary with strong software engineering background, who also happens to be an extremely effective leader (cultivates internal groups that competes with one another to produce the best version of products like Wechat) with a sound and sophisticated business model (they use the freemium model for most of their core products, achieving profitability very early on in the product cycle; they often sell stakes in their subsidaries at various stages of the companie's life cycle to diversify risks and to raise capital to fund more acquisitions and projects etc.). They also have a sound employee centric management style much like their western counterpart (Google, FB etc), a rarity among Chinese companies (they score a 4.4 on Glassdoor).
As such, I think it is a good long term hold for me, regardless of the market cycle.
Lastly a caveat: As you can tell, I'm very bullish on Tencent, and I see little risk or threat from competitions. The biggest risk (bear case) is by far the Chinese Government, who may make many unexpected move (like privatising the company, or impose strict regulations to stifle the growth of the company). The Chinese government will never let any private company become too influential or powerful in the long run.