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Rating Action:
Moody's assigns A3 to Tencent's $2.5 billion Medium Term Notes
 






 Global Credit Research - 23 Apr 2014








Hong Kong, April 23, 2014 -- Moody's Investors Service has assigned an A3 rating to Tencent Holdings Limited's US$2.5 billion Medium Term Notes drawn under its US$5 billion GMTN programme.
 


The rating outlook is stable.



RATINGS RATIONALE



"The drawdown of the GMTN programme will further enhance Tencent's already strong liquidity, enabling the company to sustain a steady growth trajectory in revenue and cash flow," says Lina Choi, a Moody's Vice President and Senior Analyst.
 


Tencent enjoys material and sustainable revenue contribution from its highly competitive online games products, which account for more than 50% of total revenue. Over the past two years, its online games revenue has grown by 35%-45%, due primarily to its diverse game portfolio with in-house and licensed titles.
 


"The additional debt will not affect Tencent's A3 credit profile and will substantiate its financial flexibility," adds Choi, also the Lead Analyst for Tencent.
 


Supported by its steadily growing operating cash flow, Tencent's adjusted debt/EBITDA of 0.9x at end-2013 combined with its US$6.6 billion net cash position is strong when compared with most A3-rated peers.
 


After the company issues the US$2.5 billion Medium Term Notes, Moody's expects it will maintain a strong net cash position and adjusted debt/EBITDA at around 1.0x-1.75x over the next 12-18 months, which is consistent with its A3 rating.
 


The stable outlook reflects Moody's expectation that Tencent will maintain its strong financial profile and leadership in China's internet market, while pursuing acquisition opportunities to complement its business model.
 


While Moody's does not see near term upward pressure on the ratings, such pressure may arise if Tencent: (1) continues to achieve strong revenue and cash flow growth; (2) develops and monetizes new mobile products without substantial cannibalization of current revenue streams; and (3) maintains prudent financial management, as evidenced by strong credit metrics, such as debt/EBITDA below 0.5x-0.75x, and an overall net cash position.
 


Downward rating pressure could emerge if Tencent: (1) experiences sustained erosion in its active user base, affecting monetization and cash flow generation; (2) engages in aggressive acquisitions that pressure its balance sheet liquidity, or raises its overall risk profile; (3) undertakes an aggressive dividend policy that weakens its balance sheet liquidity, or there is evidence of cash leakage to its parent, or related companies; and/or (4) sees its credit profile weaken, with debt/EBITDA exceeding 1.5x-2.0x, and recording a net debt position.
 


Furthermore, adverse developments in the regulatory regime that could affect Tencent's operations or business model will be negative for the ratings.
 


Tencent Holdings Limited's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside Tencent Holdings Limited's core industry and believes Tencent Holdings Limited's ratings are comparable to those of other issuers with similar credit risk.
 


Tencent Holdings Limited is a leading provider of comprehensive Internet services in China. It operates leading social networking services, online portals and online games platforms. Tencent is approximately 34%-owned by Naspers Limited (Baa3 stable).
 


REGULATORY DISCLOSURES



For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
 


For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
 


Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
 




Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
 
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
 
The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.
 

SHENZHEN, China, March 18, 2015 /PRNewswire/ --Tencent Holdings Limited ("Tencent" or the "Company") (SEHK 00700), a leading provider of comprehensive Internet services in China, today announced the unaudited consolidated results for the fourth quarter of 2014 ("4Q2014") and audited consolidated results for the year ended December 31, 2014 ("FY2014").
FY2014 Key Highlights:
•   Total revenues were RMB78,932 million (USD12,899 million[1]), an increase of 31% over the year ended December 31, 2013 ("YoY").
•   Operating profit was RMB30,542 million (USD4,991 million), an increase of 59% YoY.   Operating margin increased to 39% from 32% last year.
•   Profit for the year was RMB23,888 (USD3,904 million), an increase of 53% YoY. Net margin increased to 30% from 26% last year.
•   Profit attributable to equity holders of the Company for the year was RMB23,810 million (USD3,891 million), an increase of 54% YoY.
•   Basic earnings per share2 were RMB2.579.  Diluted earnings per share2 were RMB2.545.
•   The Board has recommended a final dividend of HKD0.36 per share for FY2014 (2013: HKD1.20 per share before the effect of the Share Subdivision, or HKD0.24 per share after the effect of the Share Subdivision), subject to approval of the shareholders.
•   On a non-GAAP basis3, excluding share-based compensation, deemed disposal gains, amortization of intangible assets and impairment provision:
o   Operating profit was RMB30,497 million (USD4,984 million), an increase of 49% YoY.   Operating margin increased to 39% from 34% last year.
o   Profit for the year was RMB24,420 million (USD3,991 million), an increase of 42% YoY. Net margin increased to 31% from 28% last year.
o   Profit attributable to equity holders of the Company for the year was RMB24,224  million (USD3,959 million), an increase of 43% YoY.
o   Basic earnings per share was RMB2.624. Diluted earnings per share was RMB2.589.
[1] Figures stated in USD are based on USD1 to RMB6.1190
[2] EPS was stated after taking into account the effect of Share Subdivision. Comparative figures have been restated on the assumption that the Share Subdivision had been effective in prior periods.
[3] Since the first quarter of 2014, we have included gains/losses on disposals of investees and businesses in the non-GAAP adjustment. Comparative figures have been restated to conform to the new presentation.
4Q2014 Key Highlights:
•   Total revenues were RMB20,978 million (USD3,428 million), an increase of 24% over the fourth quarter of 2013 ("YoY").
•   Operating profit was RMB7,394 million (USD1,208 million), an increase of 56% YoY. Operating margin increased to 35% from 28% last year.
•   Profit for the period was RMB5,954 million (USD 973 million), an increase of 51% YoY. Net margin increased to 28% from 23% last year.
•   Profit attributable to equity holders of the Company for the quarter was RMB5,860 million (USD958 million), an increase of 50% YoY.
•   Basic earnings per share were RMB0.632. Diluted earnings per share were RMB0.625.
•   On a Non-GAAP basis, excluding share-based compensation, deemed disposal gains, amortization of intangible assets and impairment provision:
o   Operating profit was RMB8,068 million (USD1,319 million), an increase of 59% YoY.   Operating margin increased to 38% from 30% last year.
o   Profit for the quarter was RMB6,841 million (USD1,118 million), an increase of 52% YoY. Net margin increased to 33% from 26% last year.
o   Profit attributable to equity holders of the Company for the quarter was RMB6,723  million (USD1,099 million), an increase of 51% YoY.
o   Basic earnings per share was RMB0.725. Diluted earnings per share was RMB0.717.
Mr. Ma Huateng, Chairman and CEO of Tencent, said, "During 2014, we made significant progress in a number of strategic initiatives that reinforced our leadership and enhanced our competitiveness. Our social platforms QQ and Weixin continued to innovate and grow. By leveraging our expertise in mobile Internet, we extended our leadership in games and online media, and made breakthroughs in emerging platforms such as online security, Android appstore, and mobile payments. We implemented our "Connection" strategy, in which we organically link our large user base with appropriate content and services, and we built strategic relationships with numerous best-of-breed vertical partners, through investment and business cooperation. We believe this strategy will enable us to create superior experiences for our users, and to participate in the growth of vertical opportunities, as the mobile Internet increasingly penetrates consumers' daily lives."
4Q2014 Financial Review
Value Added Services ("VAS").  Revenues from our VAS business increased by 44% YoY to RMB17,137 million. Online game revenues increased by 41% to RMB11,964 million. The increase was primarily driven by significant growth in revenues from smart phone games integrated with Mobile QQ and Weixin, mainly reflecting our expanded user base, our enriched game portfolio and, to a lesser extent, the impact of the aforementioned adoption of gross revenue recognition. Revenues from PC client games also increased. Social networks revenues grew by 50% to RMB5,173 million. The increase was mainly driven by higher in-game item sales within mobile platforms, as well as by subscription revenues from our QQ Membership, Super VIP, Qzone and digital content subscription services. If gross revenue recognition for smart phone games is adopted for the fourth quarter of 2013, revenues from our VAS business, online games, and social networks would have increased by 42%, 39% and 48% respectively for the fourth quarter of 2014.
Online advertising.  Revenues from our online advertising business increased by 75% YoY to RMB2,627 million. The increase primarily reflected revenue growth in video advertising as a result of more viewers and enhanced revenues from performance-based social advertising on mobile driven by Mobile Qzone and Weixin Official Accounts.
eCommerce transactions.  Revenues from our eCommerce transactions business decreased by 87% YoY to RMB446 million. The decline mainly reflected a traffic shift to JD.com following our strategic transaction with JD.com in March 2014, and the repositioning of our Yixun business from principal to marketplace operations.
Other Key Financial Information for 4Q2014
Share-based compensation was RMB644 million, up 39% YoY.
EBITDA was RMB7,929 million, up 53% YoY. Adjusted EBITDA was RMB8,424 million, up 54% YoY.
Capital expenditure was RMB1,603 million, down 5% YoY.
Free cashflow was RMB9,181 million, up 76% YoY.
Net cash position totaled RMB22,758 million, down 37% YoY, due to strategic investments, partly offset by an increase in free cash flows generated during the year.  Fair value of our stakes in listed investee companies (both associates and available-for-sale financial assets) totalled RMB60 billion as at December 31 2014.
Strategic Highlights
In 2014, we focused on our "Connection" strategy, linking our users with content, services and hardware to enhance their lives online and offline. Leveraging our core communications and social platforms, Weixin, and Mobile QQ, we made significant progress in fostering a healthy mobile ecosystem which provides our users with an expanding range of products and services, taking advantage of our strengths such as unified login, users' social graphs, multi-platform marketing capabilities, infrastructure support, payment solutions and insights into user needs.
During the year, we moved forward in monetising mobile Internet use, initially through smart phone games and performance-based social advertising. We invested heavily in content for businesses such as our literature service, music service, and video service, contributing to substantial traffic growth. Our portfolio of mobile utilities, including mobile security, browser and application store, achieved healthy market share gains. For example, YingYongBao became one of China's leading Android application stores. We significantly expanded the user bases of our mobile payment platforms and we explored Internet finance opportunities with the launch of our wealth management platform and the inception of our bank affiliate, WeBank.
To complement our internal initiatives, we entered into a strategic transaction with JD.com to reposition our eCommerce business, and we continue to enrich our O2O ecosystem by making strategic investments in and partnering with industry leaders, including 58.com, Dianping, Dididache and Koudai Gouwu.
•   From consumers' perspective, we believe these and other partnerships enable our users to benefit from an expanding range of high quality products and services.
•   From partners' perspective, we believe our user activity is starting to contribute materially to our partners' long-term growth. For example, we believe we direct substantial volumes of traffic to JD.com and 58.com.
•   From our perspective, partnerships free up our internal resources to focus on the core strengths of our platforms, while enabling us to continue to benefit financially from the growth potential of the underlying industries via our significant equity stakes in partners.
In terms of balance sheet management, we established a USD5 billion global medium term note programme in April 2014 and subsequently issued various tranches of senior notes, with an aggregate principal amount of USD4.9 billion at the end of February 2015. We received a credit ratings upgrade from Moody's on our issuer and senior unsecured debt ratings from Baa1 to A3 in March 2014.
Business Review and Outlook
Divisional and Product Highlights
•   Key platform statistics:
o   Monthly active user accounts ("MAU") of QQ was 815 million, an increase of 1% YoY.
o   Smart device MAU of QQ was 576 million, an increase of 33% YoY.
o   Peak concurrent user accounts ("PCU") of QQ was 217 million, an increase of 21% YoY.
o   Combined MAU of Weixin and WeChat were 500 million, an increase of 41% YoY.
o   MAU of Qzone was 654 million, an increase of 5% YoY.
o   Smart device MAU of Qzone was 540 million, an increase of 30% YoY.
o   Fee-based VAS registered subscriptions were 84 million, a decrease of 6% YoY.
Key Platforms
In 2014, QQ and Qzone benefited from significant growth in China's mobile user base, and consolidated their leading positions in communications and social networking.
•   For QQ, smart device MAU increased by 33% YoY to 576 million at the end of 2014, while overall PCU increased by 21% YoY to 217 million. During the year, we enhanced user engagement on Mobile QQ as we improved its community and sharing functions. We also cultivated an ecosystem for Mobile QQ users by integrating with O2O and other new services, including those provided by our strategic partners, and introducing Mobile QQ Wallet.
•   For Qzone, smart device MAU increased by 30% YoY to 540 million at the end of 2014. User activity and stickiness improved during the year, benefiting from enhanced features and improved user experience.
Combined MAU of Weixin and WeChat reached 500 million at the end of 2014, representing YoY growth of 41%.
•   For Weixin, we strengthened user interaction and engagement with new features and services, and increased the adoption of Weixin Official Accounts.
•   For WeChat, we continued to promote user engagement in selected overseas markets, especially emerging Asian markets.
The aggregate number of user accounts that have integrated bank cards with Mobile QQ Wallet and Weixin Payment exceeded 100 million as we enriched payment scenarios and launched initiatives to build user awareness and habit, such as Red Packet gifting.
Our online media platforms extended their leadership in China. Tencent News leveraged enhanced content, improved user experience and plug-ins to Mobile QQ and Weixin to achieve significant user growth and became the leading mobile news platform in China. Tencent Video improved its market position with a strong uplift in user base and traffic, thanks to enriched content and improved user experience.
VAS
In social networks, our business benefited from significant growth in in-game item sales on our mobile platforms, and higher subscription revenues as we enhanced the mobile privileges and mobile user experience for QQ Membership, Super VIP and Qzone subscription service. We also added more premium content for our literature, music, and video subscription services.
In online games, we extended our leadership in the China market from PC to mobile.
•   For PC client games, revenue increased in 2014 as we benefited from growth in major titles and launch of new titles. League of Legends delivered a robust performance with significant growth in users and revenues.
•   For mobile games, we achieved strong revenue growth during 2014, becoming the largest publisher in China and one of the largest globally. Through the year, we diversified our portfolio of smart phone games from casual to mid-core and self-developed to third-party, enriching the choices available to users.
Looking ahead, we aim to diversify and capitalize on our strong title pipeline for PC and mobile games to penetrate into new genres and solidify our market leadership.
Online Advertising
In 2014, our online advertising business benefited from revenue growth across the brand display and performance display categories. During the year, video advertising registered a robust revenue increase due to viewer traffic growth, including traffic arising from the Voice of China 3 program and FIFA World Cup content. We made significant progress in mobile advertising on Mobile Qzone and Weixin Official Accounts. Looking forward, we aim to allocate more inventory toward performance advertising, including inventory on Weixin Moments and YingYongBao. We continue to invest aggressively in video content to further build our traffic, including our recent exclusive partnerships with the HBO and NBA.
eCommerce Transactions
Our eCommerce transaction business underwent a strategy transition subsequent to our strategic transaction with JD.com in March 2014. Shifting our traffic to JD.com led to a substantial reduction in our eCommerce revenues, costs, and losses. Looking forward, we believe the strategy transition enables us to benefit more efficiently from the growth of eCommerce in China via our significant equity stakes in best-in-class eCommerce companies such as JD.com, and via generating performance-based advertising revenues from eCommerce advertisers.
Outlook and strategies for 2015
During 2015, in addition to developing our ongoing businesses, we intend to cultivate an increasingly vibrant mobile ecosystem, bringing our own and our partners' products and services to China consumers. Key aspects of cultivating this ecosystem include:
•   Working with existing and prospective strategic partners in various verticals to deliver better O2O and transactional services to users;
•   Developing our digital content businesses in partnership with key content providers, such as online literature authors, the HBO, NBA, Sony Music, Warner Music, and YG Entertainment;
•   Growing our performance-based advertising business by adding more mobile advertising inventory, enhancing advertiser tools, and expanding our advertiser base, all while balancing user experience; and
•   Promoting use of our payment services through enriched payment scenarios.
For other detailed disclosure, please refer to our website www.tencent.com/ir.
About Tencent
Tencent uses technology to enrich the lives of Internet users. Every day, hundreds of millions of people communicate, share experiences, consume information and seek entertainment through our integrated platforms. Tencent's diversified services include QQ, Weixin/ WeChat for communications; Qzone for social networking; QQ Game Platform for online games; QQ.com and Tencent News for information and Tencent Video for video content.
Tencent was founded in Shenzhen in 1998 and went public on the Main Board of the Hong Kong Stock Exchange in 2004. The Company is one of the constituent stocks of the Hang Seng Index. Tencent seeks to evolve with the Internet by investing in innovation, providing a hospitable environment for partners, and staying close to users.

I thought u had NPN and u bought at R800, my portfolio is 48% NPN, bought at R1257 & R1678. But I need to take tablets more often, I was under the impression you kinda introduced me to NPN ?

I found this some time ago

http://www.moneyweb.co.za/news/companies-and-deals/trading-idea-it-might-just-be-time-to-short-naspers/

Traders on the JSE are facing an emotional dilemma: should they decide to take a bet that shares in JSE-listed media group Naspers are going to fall from R2 000?

The company has been an excellent investment, having returned 82% over the past 12 months. However the psychological R2 000 per share mark is proving a tough nut to crack, especially with concerns that Chinese subsidiary Tencent has been overpriced and that the market may well be suffering from Naspers fatigue. 

Asset manager Vestact makes the point in a recent note to clients:

“Take the Tencent market cap in Hong Kong, which right now is 1.58 trillion HKD. Naspers owns 33.85% of TenCent, that translates to 534 billion Hong Kong Dollars. One Hong Kong Dollar at the current exchange rate is 1.56 rand. So, quite simply, multiply 534 billion HKD by 1.56 and that equals 834.8 billion rand. Naspers had a market capitalisation of 813 billion rand at the open today, up 3.7% as I write this in early morning trade which equals 843 billion rand. The difference between what the stake in Tencent is worth, relative to what the JSE buyers are willing to pay is roughly 8 billion rand.

“Effectively, the South African asset management community is telling you that the people of Hong Kong, or the folks valuing Tencent on a 53 multiple are overpaying. With growth rates in the mid 30s, the PEG ratio is somewhere in the region of 1.43 times, which is starting to reach expensive levels.”

Stockbrokerage Imara SP Reid made a similar point with the share hit R1 198 last year and valued the share as “fully valued” and noted in a November 2014 note: “In our view the current results and ROE [return on equity] of 11% are, simply put, not good enough for the current stock price. “

According to analyst consensus forecast on FT.com, the share will “outperform” the market according to views from 18 polled analysts.

Naspers has been driven by a surge in Chinese stocks but analysts are raising concerns that equity markets are overcooked and it may pay to err on the side of caution in China.

Naspers  at these levels ? Comments from Sanlam Private Wealth ..

http://www.fin24.com/Tech/Companies/The-Naspers-dilemma-20150514