Big news from Tencent again!
Naspers, a major shareholder of Tencent, announced that its Prosus unit sold 1.115 million shares of Tencent on September 8, reducing its stake to 27.99%.
Notably, Prosus said in its announcement that as part of the continued implementation of the buyback program, it has taken administrative steps to deposit an additional 192 million Tencent shares it holds in the form of certificates in Hong Kong's Central Clearing and Settlement System, which at last had a market value of nearly HK $60 billion.
On June 27, Tencent Holdings announced that Naspers Group, a major shareholder of the company, would sell shares in the company to raise funds for its buyback program.
Tencent's major shareholders continue to reduce their holdings
Prosus, Tencent's largest shareholder, said in a statement on Sept. 8 that it sold 1.115 million shares of Tencent common stock, reducing its stake to 27.99 percent, in line with the company's ongoing buyback program.
Naspers and its Internet investment arm Prosus sold more than 3.9 million shares of Tencent in the first half of the year, according to the latest filing in September.
Notably, Prosus said in its announcement that as part of its continued buyback program, it has taken administrative steps to deposit an additional 192 million Tencent shares it holds in the form of certificates in Hong Kong's Central Clearing and Settlement System, which at last had a market value of nearly HK $60 billion.
Buffett's move follows the transfer of a large chunk of BYD's H-share holdings to clearing firm Citi.
On June 27 this year, Prosus (which is majority owned by Naspers) and Naspers announced that Prosus and Naspers will commence a long-term, open-ended buyback program and will raise funds for the buyback program through an orderly floor sale of Naspers Group's holdings in Tencent Holdings. After the announcement, Tencent shares plunged in the afternoon, followed by a "negative decline", once below 300 Hong Kong dollars/share.
Naspers is the largest shareholder of Tencent through MIH TC Holdings Limited, a subsidiary of Prosus. Back in 2001, Naspers' subsidiary NIH South Africa bought a 46.5% stake in Tencent for a mere $32 million.
On April 7, 2021, Prosus massively reduced its stake in Tencent, reaching 190 million shares, equivalent to 2% of Tencent's issued capital, and cashed out more than 100 billion yuan. Tencent Holdings fell 3.75% the day the sale was announced.
Tencent keeps buying back
Interestingly, on the same day of September 8, Tencent announced that the company bought back 1.16 million shares on September 8 at a price of HK $300.2 - HK $309, costing about HK $352 million.
Tencent has spent about HK $8.881 billion to buy back 26.99 million shares since June 27 this year, when its South African majority shareholder Naspers and its subsidiary Prosus announced they were reducing their stake in Tencent. Including January's buybacks, Tencent has bought back about HK $15.276 billion this year.
On August 17, Tencent held an earnings conference call after the earnings release. As for Tencent's share price, Tencent executives say the company's share price and portfolio are significantly undervalued.
Tencent executives also said the company's focus on investment and divestment decisions has been to allocate its investments appropriately. Tencent said the current book value of the investment is good, and it will consider more forms to benefit shareholders in the future. In the future Tencent to shareholders rebate and buyback action will continue.
Duan Yongping, an investor who works against Tencent shareholder Prosus, is also in the spotlight. Since this year, Duan Yongping has repeatedly added to Tencent, and said that "the more the fall, the more buy". On August 6, Duan Yongping revealed in a domestic investor community that his current position on Tencent is not high, "currently less than 1%, not substantial investment, still thinking".
"I like Tencent a lot, but I don't have a big position... I've always regretted missing Tencent, so I've been waiting for a chance to buy more..."
The decline in earnings narrowed
Affected by the macroeconomic environment, Tencent's net profit growth since the third quarter of last year fell. Tencent's latest quarterly results came shortly after it reported an improvement in net profit, narrowing its year-on-year decline from the previous quarter, amid a series of cost-cutting measures.
Tencent's total revenue in the first half of this year was 269.5 billion yuan, down 1% year on year; The profit attributable to equity holders of the company was 42.032 billion yuan, down 53% year on year; On a non-IFRS basis, earnings attributable to equity holders of the company were 53.7 billion yuan, down 20% year on year.
For the second quarter of this year, Tencent's revenue was 134.034 billion yuan, down 3 percent year on year, while its non-IFRS profit was 28.139 billion yuan, down 17 percent year on year, narrowing from the previous quarter's net profit drop of 23 percent year on year, but up 10 percent from the first quarter.
'In the second quarter, we proactively exited non-core businesses and cut operating expenses, enabling us to achieve sequential non-IFRS earnings growth despite revenue pressure,' said Pony Ma, chairman and chief executive of Tencent Holdings. Going forward, we will focus on improving business efficiency and adding new revenue streams, including information stream advertising in our popular video accounts, while continuing to drive innovation through research and development. About half of our revenue comes from fintech and enterprise services and online advertising. These businesses directly contribute to and benefit from overall economic activity, and the growth of the Chinese economy will provide us with revenue growth opportunities.
In the second quarter, among Tencent's core business segments, the fintech and enterprise services segment generated revenue of 42.208 billion yuan in the second quarter, accounting for 32%.
In 2018, after the adjustment of the "930" organizational structure, Tencent's fintech and enterprise services sector appeared in the financial report for the first time. Since then, the revenue share has been rising all the way, from 25% in the first quarter of 2019 to more than 30% since 2021. At this point, Tencent industrial Internet and consumer Internet realize and develop, forming a stable growth "twin engines".
The TO B business is behind the "twin engines", which cannot be separated from Tencent's continuous increase in research and development. In the second quarter, research and development investment increased by 17% year-on-year TO 15.01 billion yuan. The improvement of the underlying technical capabilities also led to the acceleration of the business on the cloud, including QQ, video number, Tencent conference and other internal massive self-developed business in the second quarter to achieve full cloud.
Proofreading: Zhao Yan