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Tencent Q1 2011 Profit Up 61% YoY

Hong Kong Exchange and Clearings, 5/11/11

Chinese Internet and mobile and telecommunications value-added services provider Tencent (0700.HK) has announced its unaudited consolidated financial results for the quarter ended March 31, 2011, with revenue up 50% YoY and up 14.7% QoQ to reach RMB 6.34 bln.

Net income attributable to equity holders of the company rose 61% YoY and 30.4% QoQ to RMB 2.87 bln.

Revenue from internet value-added services (IVAS) rose 55% YoY and 19.8% QoQ to reach RMB 5.25 bln. Revenue from online gaming grew 76.6% YoY and 28.2% QoQ to RMB 3.57 bln, primarily reflecting increased monetization of major games during the Chinese New Year holidays. Tencent's licensed first person shooter (FPS) Cross Fire saw strong revenue growth and underpinned growth in online gaming revenue, with significant contributions also coming from licensed MMORPG Dungeon & Fighter, licensed browser game Qi Xiong Zheng Ba and licensed hardcore 3D MMORPG World of West (Pilgrimage to the West), which began open beta testing in Q1 2011. Tencent's Roco Kingdom, an online game in the children segment, also saw PCU increase to 400,000. Revenue from community value-added services grew 23.1% YoY and 5.1% QoQ to RMB 1.68 bln. SNS Qzone benefited from growth in virtual item sales driven by an increased number of third-party social applications on the platform. Revenue from QQ Membership increased primarily as a result of enhanced privileges and value-added functions as well as positive seasonality.

Revenue from wireless value-added services (WVAS) grew 25.8% YoY and 6.8% QoQ to reach RMB 777.8 mln, due to growth in revenues from bundled SMS packages and an increase in mobile SNS and mobile gaming revenues.

Revenue from online advertising grew 37.5% YoY, but fell 27.6% QoQ to RMB 280.9 mln.

Active instant messaging (IM) user accounts increased 4.1% QoQ to 674.3 mln. Peak simultaneous online user accounts for IM services increased 7.6% QoQ to 137.2 mln. Active user accounts of SNS Qzone increased 2.6% QoQ to 504.8 mln, while the company's real-name SNS platform for university students and white collar communities saw active user accounts increase 19.9% QoQ to 101.4 mln. Peak simultaneous online user accounts of QQ Game portal (for mini casual games only) increased 13.2% QoQ to 7.7 mln. IVAS paying subscriptions grew 10% QoQ to 72.3 mln. WVAS paying subscriptions fell 10.6% QoQ to 27.2 mln.

During Q1 2011, Tencent acquired 100% equity interest in a mobile security company for a consideration of RMB 42.8 mln. As a result, RMB 40.32 mln, being the excess of the consideration over the fair value of the net assets acquired, was recorded in intangible assets as goodwill.

Tencent also detailed the size of the additional equity stake it acquired in Riot Games in February 2011 - 70.44% - bringing Tencent's total equity stake in Riot Games to 92.78%. The remaining 7.22% equity share is held by the founders of Riot Games. Tencent purchased the additional 70.44% stake for a cash consideration of approximately USD 231.5 mln, along with other cash and non-cash considerations.

To view Tencent's full earnings report, please click here. For previous reports on anti-virus firms Tencent was rumored to be considering for acquisition, please see "Rumor: Tencent to Acquire Jiangmin," MD 11/15/10 issue.

Keywords: active users M&A browser game Cross Fire Dungeon & Fighter FPS mobile gaming online gaming World of West Internet profit revenue security online advertising MMORPG Qzone Tencent QQ WVAS mobile SNS SMS SNS 0700.HK Qi Xiong Zheng Ba Q1 2011 licensed game QQ Games users fiscal report Pengyou Roco Kingdom segmentation youth

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