Tencent's headquarters at Nanshan Hi-Tech Industrial Park in the southern Chinese city of Shenzhen. File picture: Bobby Yip

Hong Kong - Tencent Holdings, Asia’s largest Internet company, posted first-quarter profit that beat analyst estimates on higher revenue from online games and advertising through messaging services including WeChat and QQ.

Net income rose 60 percent to 6.46 billion yuan ($1.04 billion) in the three months ended March from 4 billion yuan a year earlier, the Hong Kong-listed company said in a statement today.

That compares with the 4.86 billion-yuan average of nine analysts’ estimates compiled by Bloomberg.

The company, based in Shenzhen, added games and advertising services to messaging applications such as WeChat, known as Weixin in China, as it competes with Alibaba Group and Baidu.

Tencent is counting on the popularity of its apps and games including Blade & Soul to win a bigger slice of China’s 618 million Internet users.

“We expect a strong set of numbers driven by Weixin revenues,” Piyush Mubayi, an analyst at Goldman Sachs in Hong Kong, wrote in a report before the earnings announcement.

“We also expect strong performance of the desktop titles, driven by content upgrades in major games.”

Shares of Tencent rose 1.3 percent to close at HK$514 in Hong Kong trading.

The company’s shares have gained 3.9 percent this year, compared with a 3.1 percent drop in the city’s benchmark Hang Seng Index.


WeChat, QQ


The company’s stockholders are considering a proposal to split each share into five as the company tries to boost holdings by individuals.

The Hong Kong market requires investors to buy shares in multiples of 100.

Revenue rose 36 percent to 18.4 billion yuan.

Online game revenue increased to 10.4 billion yuan, and online advertising revenue rose 38 percent from a year earlier to 1.17 billion yuan.

QQ, which had about 848 million monthly active users at the end of last year, caters toward people looking for entertainment content, usually in second- and third-tier cities.

WeChat, which has about 396 million monthly active users, is geared toward white-collar consumers.

Competition among Internet companies is intensifying as Alibaba filed for what may be the largest initial public offering in the US on May 6.

Chinese Internet companies led by Alibaba and Tencent have announced 61 acquisitions and investments with a value of $24.5 billion since 2012, according to data compiled by Bloomberg.

Tencent said May 6 it will buy a stake in digital mapping provider NavInfo for 1.17 billion yuan.


Facebook, Rakuten


Recent deals have highlighted the potential value of WeChat.

In February, Facebook agreed to pay as much as $19 billion for rival message service WhatsApp.

The same month Rakuten agreed to buy message and calling app Viber for $900 million.

WeChat may be worth as much as $64 billion given the potential for the service to be monetised, Elinor Leung, an analyst at CLSA Ltd., said in a March 10 report.

Tencent has faced regulatory challenges as it attempts to expand online financial services.

China’s central bank in March blocked plans by Tencent and Alibaba to offer virtual credit cards as the government tried to tighten restrictions on online financial products.

The People’s Bank of China also suspended the use of so-called Quick Response codes for payment purposes.

QR codes have been a popular feature on WeChat as part of Tencent’s push for more commercial applications on the service, such as allowing users to buy game services and investment products.


GunZ Dash


Chinese central bank draft rules regulating the amount of money that payment accounts can spend and transfer also may affect Tencent’s third-party payment system.

Tencent said March 18 through one of its official WeChat accounts it submitted feedback on the draft rules with the central bank, including its view that the company’s investment platform isn’t subject to the proposed regulations because users transfer money directly from their bank accounts.

Tencent has introduced 18 games for Google Inc.’s Android operating system and 16 games for Apple Inc.’s iOS -- including GunZ Dash.

The company’s open platform shared 5 billion yuan in revenue with developers, Dowson Tong, Tencent president of social network group, said at a conference in Beijing on May 10. - Bloomberg News