Chinese internet giant Tencent 'severely undervalued'

Morningstar analysts believe temporary suspension of game approval and a weak macro environment provide a good opportunity to accumulate this high-quality name

譚綺蘅 22 November, 2018 | 6:00PM

Even after lowering our forecasts, we think  Tencent (TCEHY) is severely undervalued. The wide-moat Internet giant has the largest social networking platforms in China, Weixin/WeChat and QQ, and monetizes them through selling in-game items, virtual items, premium service subscriptions, online advertising, payments, financial products, and other products.

We now expect a 10-year compound annual growth rate of 20% for operating profit, compared with 29% previously, and a 10-year compound annual growth rate of 19% for revenue, versus 29% previously.

The other revenue segment, which is mainly composed of payment and cloud, has slowed faster than our expectations in recent quarters. This has led to a 10-percentage-point reduction in our 10-year other revenue CAGR to 30%.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Tencent Holdings Ltd ADR70.40 USD-1.23

About Author


譚綺蘅  譚綺蘅為晨星投資管理(亞洲)股票分析員,主要覆蓋亞洲地區的消費股。

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