TENCENT Inc (QQ), which will join the Hang Seng Index starting from June 10, announced yesterday that net profit in the first quarter jumped about 85 percent from last year, thanks to Internet value-added services (IVAS) income and its expanding game business.
From January to March, net profit of the Shenzhen-based Tencent was 534.4 million yuan (US$76.1 million), an increase of 3.8 percent compared with the previous quarter and a growth of 85 percent year-on-year, beating Morgan Stanley's forecast of 403 million yuan.
The revenue grew 27.7 percent to 1.43 billion yuan in the quarter, compared with Morgan Stanley's forecast of 1.19 billion yuan.
During the first quarter, Tencent benefited from positive seasonality associated with Chinese New Year holidays which increased the consumption of IVAS and games, according to the country's No. 1 instant message provider with 783.4 million QQ users.
Tencent also continued to increase its focus on developing and advertising business, such as signing up as the exclusive Internet partner to the 2010 World Expo in Shanghai , Ma Huateng, Tencent's chairman and chief executive said.
Tencent (QQ) is the largest "online park" in China, as 60 percent of Chinese Internet users have QQ accounts and there seem to be many embedded "call options" for Tencent as new services such as blogging, QQ pets and online auctions.
Tencent's peak simultaneous online user accounts for IM services recorded 40.3 million, a growth of 11.6 percent quarter on quarter.
Revenue from Tencent's IVAS was 998.7 million yuan, representing 69.7 percent of the total increase of 33.5 percent quarter on quarter and 99 percent from a year ago. IVAS income growth came from online gaming, online identity and community business, particularly Qzone, QQ Show and Premium QQ, due to the seasonal impact of the Chinese New Year holidays and winter break for students.
Revenue from Mobile and telecommunications value-added services (MVAS) were 288.3 million yuan, an increase of 46.7 percent year-on-year.
Revenues from online advertising were 144.6 million yuan, an increase of 95.2 percent from a year ago. The Company expects the second quarter will present a weaker seasonality for IVAS as the May 1 long holiday in China was shortened from seven days to three days this year.
On the other hand, online advertising revenue will increase due to better seasonality thanks to the Olympics-related advertising. Tencent's joining of HSI, the most widely quoted indicator of the Hong Kong stock market, reaffirms recognition of Tencent's performance, industry insiders said.
Tencent's share price jumped 3.35 percent to HK$64.75 (US$8.3) yesterday.