Tencent Holdings Ltd (0700)

[ksir]

Ksir, 

大道无形我有型 is the account of Duan Yongping?

Yup, that is right.
His comments are usually direct, blunt & almost always looking further than others.

The regulations (if ever being implemented as is), will likely kill off the existing small & medium gaming companies (the agency heads going to roll before that ever happen).
Releasing such rules during such depressed time and on friday (why not hold a few more hours and waited for the market to close, for market to digest over the weekend??), it is either "someone" trying to profit from the market panic or just the pure show of stupidity. I bet could be a combination of both.

But anyway, the saga did throw me opportunities to pick up more tencent below 300 and netease at 110. For that, kudos man!

Imho, the rules need to kill off half of the gaming companies before it brings down NetEase and almost all gaming companies before Tencent!

Thank you. I find his comments frank and sharp too. Will keep an eye on his postings.

In your investment thesis for Tencent, 

- how much of it is based on a 'value-play'  / that the price now is not commensurate to its current strength and quality; and

- how much of it is based on a 'growth-story' / that earnings could be substantially higher 5, 10, 15 years from now?

I ask because I struggle to see what future growth there can be given its dominance.

To start with, I am not a visionary and I don't have insider insights of Tencent, NetEase or other China Tech companies.
I am just a regular & happy user of their products/games.
Other than games, I constantly use weChat (mini programs, channels etc), weRead & Huya.

My main reasoning for investing in Tencent is so simple that it borders at dumb
I believe Weixin is a fertile land, it's a virtuous ecosystem for its habitants and products/services offered to satisfy their needs.

As long as it remains so, the growth should come from deepening & widening the products/services and NOT from expanding its habitants (being almost all china users already onboard and restriction of international users).

Gaming is just a huge product segment NOW and probably in near future, but as much as I love playing games (now indulging myself in pokemon unite), it's not my main reason to own Tencent.

Ksir,

I don't think your main reason is dumb. In fact, I quite like the decisiveness of your conclusion that Weixin is a fertile land. Thanks for sharing.

I have been reading and trying to imagine what new significant products/services there can be to engender growth. Not easy as I do not use much of Tencent functions, only its messaging function.

From what I can make sense of (but I am more conservative than imaginative), I think there can be incremental (low single-digit) growth contributed by:
1)   Mini programs giving Tencent a small increment in advertising revenue;
2)   Mini programs giving Tencent a small increment in fees earned from commercial payments;
3) Video accounts giving Tencent a small increment in advertising revenue;
4) Video accounts giving Tencent a small increment in commission from ecommerce live streaming;
5) AI possibly adding new commercial vitality to entire existing range of products.

But because it all seems incremental (low single-digit) growth so I thought a PE of 15X is not cheap, but reasonable. Am I missing something?

Do you pay (paid subscription) for any of your Tencent services (weRead)?

As an aside, there has been no news on the new game, To Jin Yong, which I thought could be a big thing.

Yes, I've been paid user of weRead for 2 years.
I'd say cheap and good! 
UX is the best digital reader I ever used.

Imo, some main Products & Services in Weixin ecosystems are not optimally monetized! 
Case in point, to me personally, official accounts are really godsend, far better than any blogs, substack etc. 
Mini Programs although mostly not available in SG, I believe it's also under-monetized. Currently the mini games are the super high margin growth area.

Channels is growing well also, although rather far behind Douyin! 
Their strength is in Weixin close-loop. It should grow well.

WePay & Financial products should return to growth, but they are cautious, as Pony said it well, it's about who survive longer, NOT about who grow faster (Ant has proved the message).

I will not hold my breath for To Jin Yong game, NetEase is stronger in this area, Justice Mobile has proved this and its new "where Wind meets" game looks darn interesting.
For Tencent game, I'd be more interested in their international games (eg: Black Wukong, Last Sentinel) and how their new party game (spent a tons to promote) can beat NetEase's eggy party and of course their growing professional competition games (eg: Valorant, PUBG etc).
Their growing eSport is another under-monetized one as well. 
I used to be Soccer fans, but after watching eSports (LOL, HOK etc), I find soccer darn boring. hahaha (maybe only me, but I think eSports are the sport of the future).

<invested, main holding and super biased! >