SG Talk

How good is the market at discounting expectations?
If earnings are "less bad than expected" how would the stock move?

Quarterly earnjngs contain alotbof noise anyway and carry artifacts of temporary economic slowdown which has less baring on the company long term prospects.

This company is a steal at the current stock price.. If one subtract its investment portfolio from the capitalisation, the price of its operating business is very low. That is why it attracted fame value investor Monash Pabraj. There is no need to over complicate the analysis.

Revenues: +8% YoY, non-IFRS([1]) profit attributable to equity holders of the
Company: -25% YoY
* Total revenues were RMB144,188 million (USD22,615 million([2])), an increase
of 8% over the fourth quarter of 2020 ("YoY").
* On a non-IFRS basis, which is intended to reflect core earnings by excluding
certain one-time and/or non-cash items:
- Operating profit was RMB33,151 million (USD5,200 million), a decrease of
13% YoY. Operating margin decreased to 23% from 28% last year.
- Profit for the period was RMB25,758 million (USD4,040 million), a
decrease of 25% YoY. Net margin decreased to 18% from 26% last year.
- Profit attributable to equity holders of the Company for the quarter was
RMB24,880 million (USD3,902 million), a decrease of 25% YoY.
- Basic earnings per share were RMB2.609. Diluted earnings per share were
RMB2.547.
* On an IFRS basis:
- Operating profit was RMB109,723 million (USD17,210 million), an increase of
72% YoY. Operating margin increased to 76% from 48% last year.
- Profit for the period was RMB95,705 million (USD15,011 million), an
increase of 61% YoY. Net margin increased to 66% from 44% last year.
- Profit attributable to equity holders of the Company for the quarter was
RMB94,958 million (USD14,894 million), an increase of 60% YoY.
- Basic earnings per share were RMB9.957. Diluted earnings per share were
RMB9.788.
* Total cash were RMB281,286 million (USD44,118 million) at the end of the
quarter.
[1] Non-IFRS adjustments exclude share-based compensation, M&A related impact such as net (gains)/losses from investee companies, amortisation of intangible assets and impairment provisions/(reversals), SSV & CPP, income tax effects and others.
[2] Figures stated in USD are based on USD1 to RMB6.3757

The ADR shares have not opened yet.

We will see how it goes.

As with Alibaba and Xiaomi it is expected to announce share buybacks.

Here is a summary.

I am starting to get more interested in Tencent the latest results is merely a rear view on a problematic year with a China slowdown. It's business outside China is fired up and growing

The ADR stock price suggest the stock to open at $374 down from Wed close. $374 is the price of the stock on Tuesday morning.

Today I have only purchased small amount of this stock after it already fell sharply. It had another leg down to $300 before rebounding to $400....and now $374. The short term volatility will remain but it's the longer term prospects that I am keen on.

1. It's core business generates roughly $20B
2. Most of which goes to its investment portfolio now worth $250-$300. Many of it's investments are Chinese tech so you are also buying into them at low prices.
3. The core business has monopolistic characteristics hence can maintain cashflow for many yrs.

Main risk is again the China regulations which is unpredictable but recently seems to indicate we are near to end.

I will be buying Tencent today after a long break from buying HK listed China tech.

Stock now is $360.
While earnings were expected given China economic slowdown, investors were disappointed there was no stock buyback announced.

I will be a buyer at around this price, however given market weakness I will buy in slowly.