Tencent earnings in Q2 up 58%, beating estimates

Mobile platforms continue to give a lift to Internet company's portfolio

Tencent Holdings Ltd, China's largest listed Internet company, reported strong quarterly earnings on Wednesday as the company further deepened mobile engagement across its social, gaming and media platforms.

Net profit for the quarter ending in June jumped 58 percent year-on-year to 5.83 billion yuan ($947 million). Revenue in the quarter climbed 37 percent to 19.75 billion yuan.

The solid performance in the second quarter beat analysts' estimates of 5.73 billion yuan in revenue, a Reuters report said.

Ma Huateng, chairman and chief executive officer of Tencent, said in a statement that the company's ecosystem continues to expand as it pursues the strategy of working with category leaders, including NavInfo, a mapping service provider, and 58.com, a local listing platform.

"We are seeing the benefits of this approach, as evidenced in the successful listing of JD.com. Looking forward, we will continue to grow our platform, invest in areas such as online-to-offline business and content production, and enhance our user experience," he said.

The Shenzhen-based Tencent seems to have succeeded in integrating its social networking tools, such as mobile messaging tools mobile QQ and WeChat, with companies in which it invests, such as JD.com Inc, China's largest online direct sales platform.

Tencent, which has engaged in a buying spree along with e-commerce conglomerate Alibaba Group Holding Ltd since late last year, has made a lot of investments, including taking a 15 percent stake in JD.com in March.

Through connecting its core social capabilities with JD.com, users of Tencent's WeChat, a dominant mobile social tool in China, can purchase directly from the e-commerce giant through a direct access point on the app. Tencent said that the combined monthly active users of WeChat, both in and outside China, increased by 57 percent year-on-year to 438 million by the end of June.

Neil Flynn, head equity analyst at chineseinvestors.com, a leading analysis firm for US-listed Chinese companies, said a year-on-year profit growth of 58 percent was very impressive given the size of Tencent.

The Beijing-based Baidu Inc also reported a net income that beat analysts' estimates in the second quarter in late July. The search giant saw its net income grow by about 34 percent year-on-year to 3.55 billion yuan in the quarter that ended in June, fueled by strong growth in mobile applications.

"Out of China's big three tech firms, Tencent has a major advantage over Alibaba and Baidu because it has the WeChat messaging platform, which is simply untouchable," said Flynn, who has followed China's Internet sector for years.

Alibaba last year tried to launch a similar service called Laiwang, but it just could not compete.

"What we are seeing is that Tencent is adding more and more features to its platforms, such as a permanent link to JD.com, so that users never have to leave the Tencent ecosystem," Flynn said. "I think we will continue to see more of these features because Tencent can help other firms get greater exposure to customers through its QQ and WeChat platforms.

"WeChat will essentially become a portal for users where they can not only message friends but also shop and play games. From this, we will see stronger advertising revenues because advertisements can be personalized for each user," he said.

Tencent reported that its online advertising business increased by 75 percent quarter-on-quarter to 2.06 billion yuan in the second quarter. The company's financial report noted that "this primarily reflected more favorable seasonality in the second quarter, as well as the positive impact of the FIFA World Cup and our strategic cooperation with JD.com."