Produced by | Morgan Stanley Finance
After "refuted the rumors" that it would not sell Meituan holdings, Tencent announced on the occasion of releasing its latest third-quarter report that it would distribute 958 million Meituan shares to shareholders. Based on Meituan's latest share price, these shares are worth HK$150 billion.
.958 billion shares account for 15.5% of Meituan's total share capital and Tencent holds 90.9% of Meituan's shares. means that Tencent almost clears its holdings of Meituan, and it is also after the "clearance dividend " JD holdings, Tencent once again cashes in investment assets in the same way. Tencent President Liu Chiping (Martin) also announced his resignation as non-executive director of Meituan.
At the end of last year, Tencent announced that it would distribute approximately 460 million shares of JD.com held to shareholders, with a market value of more than 110 billion yuan. JD.com's equity structure at the end of the first quarter of 2022 shows that Tencent, a major shareholder who once held a 16.9% stake, has basically cleared its position and exited.
Southeast Asia's "Little Tencent" SEA is another important investment Tencent has dealt with this year. Tencent once held 21.3% of SEA equity . First, it reduced its holdings by 2.6% at the beginning of this year and cashed out by 3.6 billion yuan. In September this year, it announced that the resignation of Ren Yuxin , the representative of the board of directors of SEA, "deemed as disposal" and obtained a profit of 41.3 billion yuan. This part of the shares has been transferred to "financial assets measured at fair value and their changes are included in other comprehensive income" in the third quarter report, that is, financial assets that are available for sale and cashed out at any time.
In the past decade, Tencent has relied on the dual-wheel drive of "traffic + capital" to become the top Internet giant in China and even the world. Incomplete statistics show that Tencent has accumulated outward investment in since its listing, and has reached 750 billion yuan, with a net investment of about 450 billion yuan after deducting more than 200 billion yuan, with a net investment of about 450 billion yuan.
Tencent's portfolio has a very amazing return. The fair value of , the listed company held by Tencent, reached one trillion yuan at the end of 2021 (including JD.com). If the future capitalization appreciation of the assets of unlisted companies is taken into account, the rate of return will further increase. Taking JD.com as an example, Tencent initially invested 20.9 billion yuan and finally made a profit of more than 80 billion yuan.
latest third quarter report disclosed that the fair value of the equity interests of listed companies held by Tencent is 532.5 billion yuan, and the book value of unlisted companies is 433.95 billion yuan, totaling approximately 870 billion yuan.
It should be noted that as of the latest data at the end of the third quarter of 2022, about 700 billion yuan of Tencent's nearly 1.5 trillion assets were investment assets. However, the true value of these investment assets is not fully reflected in the balance sheet and profit and loss statement , especially the investments of associate companies up to 300 billion yuan, which will only be included in other income during the sale.
In the past two years, Tencent has accelerated the disposal of investment assets, including selling its shares in listed companies, "dividends" the shares of listed companies to shareholders, and listing assets of unlisted companies as soon as possible. The essence is to re-insert the hidden profits of into the profit and loss statement.
market believes that under the background of China's Internet industry entering a new cycle, Tencent's operating performance growth slowed downward pressure after 2020, and the profit and loss surface was under downward pressure. At this time, Tencent increased shareholder returns by increasing "dividends" and showed goodwill to the market, which will help stabilize the confidence of long-term investors and also bought time for Tencent's business reform.
Another thing worth mentioning is that most of Tencent’s investments in the past decade have been based on strategic layout. As the development of China’s Internet enters a new stage, Tencent’s investment business’s strategic goals and financial goals have been basically achieved, and it is reasonable to monetize mature investment assets including JD.com, Meituan, etc.
From another perspective, Tencent's exit from also leaves room for these companies' subsequent capital operations.
's latest financial report shows that Tencent's third-quarter revenue and shareholder net profit were 140.1 billion yuan and 39.9 billion yuan respectively, with changing -2% and 1% year-on-year compared with , respectively. In the quarter, Tencent shareholders' net profit increased significantly from month-on-month (18.6 billion yuan, Q2), mainly due to book adjustments in SEA equity investment.
In the third quarter, Tencent's adjusted net profit was 32.3 billion yuan, an increase of 2% and 15% year-on-year and month-on-month respectively. It is also the first time this indicator has achieved growth after four consecutive quarters of decline. This is mainly about streamlining business, cost control, and laying off employees and increasing efficiency.
As of the end of September 2022, Tencent had 108,800 employees, a decline of two consecutive quarters, a decrease of more than 7,000 from the end of the first quarter of this year. Tencent's sales and marketing spending in the third quarter fell by 32% year-on-year.
Specifically, Tencent's main business is still performing sluggish, with domestic game revenue and online advertising revenue all declining, but international game revenue increased by 9% in the third quarter, which is a small highlight. In addition, the number of daily active accounts of WeChat mini program exceeded 600 million, and increased by more than 30% year-on-year.
