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Tencent Holdings Ltd demonstrates fast growth

29/03/2017 • About Tencent Holdings Ltd ($700) • By InTwits

Tencent Holdings Ltd is an attractive growth stock in Internet industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story


Tencent Holdings Ltd showed growth in the last financial year. The company's revenue surged on 47.7% in FY2016. Together with revenue growth Tencent Holdings Ltd also managed to keep EBITDA growth. EBITDA grew 46.7% for the same period.

In the longer period the company showed fast revenue growth of 36.0% from FY2013 to FY2016 annualy. EBITDA surged on 46.2% from FY2013 to FY2016 annualy.

Tencent Holdings Ltd ($700) financials for the last 5 years

mln. CNY FY2012 FY2013 FY2014 FY2015 FY2016
Revenue43,89460,43778,932102,863151,938
Revenue growth, %37.7%30.6%30.3%47.7%
Gross margin, %58.5%54.0%60.9%59.5%55.6%
SG&A, %22.6%24.4%26.4%22.8%22.8%
EBITDA16,85720,97733,54044,70265,564
EBITDA growth, %24.4%59.9%33.3%46.7%
EBITDA margin, %38.4%34.7%42.5%43.5%43.2%
Net Income12,73215,50223,81028,80641,095
Net Income margin, % 29.0%25.6%30.2%28.0%27.0%
 
CAPEX3,9704,8814,3198,4850
CAPEX/Revenue, %9.04%8.08%5.47%8.25%0%
Debt10,70015,05336,07365,329109,497
Cash13,38320,22842,71343,43871,902
Net Debt/EBITDA-0.2x-0.2x-0.2x0.5x0.6x
 
ROIC, %29.5%26.7%29.1%24.3%21.6%
ROE, %36.5%31.2%34.5%28.8%27.9%

Profitability and return on investment


EBITDA margin declined slightly from 43.5% in FY2015 to 43.2% in FY2016. If we look for the longer period EBITDA margin surged on 8.50 pp from 34.7% in FY2013 to 43.2% in FY2016.

Tencent Holdings Ltd shows attractive ROIC at 21.6% for the last 12 months which assumes stable development model. Three years ago it was higher at 26.7%. For the last three years the average ROIC was 25.0%.

Tencent Holdings Ltd showed small Net Income margin decline of 1 pp from 28% to 27% in FY2016. In the longer period Net Income margin increased on 1.40 pp from 25.6% in FY2013 to 27% in FY2016.

Tencent Holdings Ltd operates at ROE of 27.9%. It's average level of ROE for the last three years was 30.4%.

Capital expenditures (CAPEX)


In FY2016 the company had CAPEX/Revenue of 0%. CAPEX/Revenue dropped on 8.08 pp from 8.08% in FY2013 to 0% in FY2016.

Leverage (Debt)


Having such a fast growth profile the company keeps low debt level at 0.6x Net Debt/EBITDA. In the last 3 years Tencent Holdings Ltd's leverage surged on 0.82x from -0.25x in FY2013 to 0.57x in FY2016.

Management team


Tencent Holdings Ltd is run by Ma Huateng "Pony" as a CEO and by Shek Hon Lo "John" as a CFO.

Peers in Internet


Below we provide Tencent Holdings Ltd benchmarking against other companies in Internet industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Asian Capital Resources Holdings Ltd ($8025)-5.6%1,114.6%
China Public Procurement Ltd ($1094)5,077.0%-67.5%1,258.9%105.7%
Ourgame International Holdings Ltd ($6899)33.7%14.8%101.3%61.8%
Media Asia Group Holdings Ltd ($8075)275.6%3.6%55.9%-26.9%
Tai Shing International Holdings Ltd ($8103)-35.9%-4.9%48.5%-13.6%
 
Median (22 companies)12.3%8.3%13.0%9.8%2.1%
Tencent Holdings Ltd ($700)37.7%30.6%30.3%47.7%


Top companies by Gross margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Sino-I Technology Ltd ($250)75.3%82.7%78.8%82.8%82.9%
ABC Multiactive Ltd ($8131)86.7%83.5%86.2%82.1%74.8%
China Digital Culture Group Ltd ($8175)64.3%78.6%65.2%72.7%
Prosten Technology Holdings Ltd ($8026)52.4%47.8%50.8%67.1%53.8%
SUNeVision Holdings Ltd ($8008)53.5%60.5%64.7%65.6%63.9%
 
Median (19 companies)66.9%66.2%61.7%45.7%45.3%
Tencent Holdings Ltd ($700)58.5%54.0%60.9%59.5%55.6%


Top companies by EBITDA margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
SUNeVision Holdings Ltd ($8008)64.2%71.6%71.6%72.4%68.9%
China Digital Culture Group Ltd ($8175)-66.7%22.5%40.8%46.6%
Tradelink Electronic Commerce Ltd ($536)38.6%33.8%33.1%31.1%
GET Holdings Ltd ($8380)-237.7%56.8%66.4%28.5%
Media Asia Group Holdings Ltd ($8075)-30.8%18.6%13.4%25.1%14.2%
 
Median (22 companies)5.1%16.9%13.4%7.2%-2.9%
Tencent Holdings Ltd ($700)38.4%34.7%42.5%43.5%43.2%


Top companies by CAPEX/Revenue, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
AcrossAsia Ltd ($8061)56.6%65.9%36.3%45.8%
Asian Capital Resources Holdings Ltd ($8025)0.0%12.2%14.0%
SUNeVision Holdings Ltd ($8008)7.6%10.2%62.8%12.4%41.1%
Ourgame International Holdings Ltd ($6899)1.8%3.1%1.7%6.4%
Sino-I Technology Ltd ($250)9.3%12.7%4.0%6.0%
 
Median (22 companies)3.2%2.5%1.7%0.8%2.4%
Tencent Holdings Ltd ($700)9.0%8.1%5.5%8.2%


Top companies by ROIC, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Pacific Online Ltd ($543)37.9%36.4%28.6%21.6%
Tradelink Electronic Commerce Ltd ($536)22.4%18.2%17.4%16.7%
SUNeVision Holdings Ltd ($8008)10.8%13.3%14.4%15.3%15.3%
Ourgame International Holdings Ltd ($6899)42.8%33.3%17.5%12.7%
Cogobuy Group ($400)13.5%12.1%11.8%10.5%
 
Median (23 companies)-4.4%4.0%-1.3%1.0%-5.6%
Tencent Holdings Ltd ($700)29.5%26.7%29.1%24.3%21.6%


Top companies by Net Debt / EBITDA

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Tai Shing International Holdings Ltd ($8103)82.7x
AcrossAsia Ltd ($8061)2.3x2.9x1.5x7.7x
Sino-I Technology Ltd ($250)9.4x4.1x3.1x
Cogobuy Group ($400)5.0x0.7x2.4x3.1x
GET Holdings Ltd ($8380)-1.1x-1.0x0.7x
 
Median (15 companies)-1.6x-1.1x-1.5x-1.7x1.2x
Tencent Holdings Ltd ($700)-0.2x-0.2x-0.2x0.5x0.6x