Tencent Holdings Ltd CAPEX jumped on 96.5% in 2015 and Revenue surged on 30.3%
17/03/2016 • About Tencent Holdings Ltd (
$700) • By InTwits
Tencent Holdings Ltd reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Tencent Holdings Ltd is a fast growth stock: 2015 revenue growth was 30.3%, 5 year revenue CAGR was 39.3% at 2015 ROIC 24.3%
- Tencent Holdings Ltd has medium CAPEX intensity: 5 year average CAPEX/Revenue was 9.0%. At the same time it's a lot of higher than industry average of 4.9%.
- CAPEX is quite volatile: 8,485 in 2015, 4,319 in 2014, 4,881 in 2013, 3,970 in 2012, 4,052 in 2011
- The company has highly profitable business model: ROIC is at 24.3%
- It operates with high leverage: Net Debt/EBITDA is 0.5x while industry average is -8.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Tencent Holdings Ltd ($700) key annual financial indicators
| mln. CNY | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 28,496 | 43,894 | 60,437 | 78,932 | 102,863 | 30.3% |
| Gross Profit | 18,568 | 25,686 | 32,659 | 48,059 | 61,232 | 27.4% |
| SG&A | 6,221 | 9,902 | 14,740 | 20,859 | 23,409 | 12.2% |
| EBITDA | 13,724 | 16,857 | 20,977 | 33,540 | 44,702 | 33.3% |
| Net Income | 10,203 | 12,732 | 15,502 | 23,810 | 28,806 | 21.0% |
Balance Sheet
|
|---|
| Cash | 12,612 | 13,383 | 20,228 | 42,713 | 43,438 | 1.7% |
| Short Term Debt | 7,999 | 1,077 | 2,589 | 5,049 | 15,315 | 203.3% |
| Long Term Debt | 3,733 | 9,622 | 12,464 | 31,024 | 50,014 | 61.2% |
Cash flow
|
|---|
| Capex | 4,052 | 3,970 | 4,881 | 4,319 | 8,485 | 96.5% |
Ratios
|
|---|
| Revenue growth | 45.0% | 54.0% | 37.7% | 30.6% | 30.3% | |
| EBITDA growth | 32.4% | 22.8% | 24.4% | 59.9% | 33.3% | |
| Gross Margin | 65.2% | 58.5% | 54.0% | 60.9% | 59.5% | -1.4% |
| EBITDA Margin | 48.2% | 38.4% | 34.7% | 42.5% | 43.5% | 1.0% |
| Net Income Margin | 35.8% | 29.0% | 25.6% | 30.2% | 28.0% | -2.2% |
| SG&A, % of revenue | 21.8% | 22.6% | 24.4% | 26.4% | 22.8% | -3.7% |
| CAPEX, % of revenue | 14.2% | 9.0% | 8.1% | 5.5% | 8.2% | 2.8% |
| ROIC | 33.4% | 29.5% | 26.7% | 29.1% | 24.3% | -4.9% |
| ROE | 40.6% | 36.5% | 31.2% | 34.5% | 28.8% | -5.7% |
| Net Debt/EBITDA | -0.1x | -0.2x | -0.2x | -0.2x | 0.5x | 0.7x |
Revenue and profitability
The company's Revenue surged on 30.3% in 2015. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 6.7 pp from -2.4% to 4.4% in 2015.
Gross Margin decreased slightly on 1.4 pp from 60.9% to 59.5% in 2015. SG&A as a % of Revenue decreased on 3.7 pp from 26.4% to 22.8% in 2015.
Net Income marign decreased on 2.2 pp from 30.2% to 28.0% in 2015.
Capital expenditures (CAPEX) and working capital investments
In 2015 Tencent Holdings Ltd had CAPEX/Revenue of 8.2%. The company's CAPEX/Revenue decreased slightly on 0.80 pp from 9.0% in 2012 to 8.2% in 2015. It's average level of CAPEX/Revenue for the last three years was 7.3%.
Return on investment
The company operates at high and attractive ROIC (24.28%) and ROE (28.80%). ROIC decreased on 4.9 pp from 29.1% to 24.3% in 2015. ROE decreased on 5.7 pp from 34.5% to 28.8% in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.5x and Debt / EBITDA is 1.5x. Net Debt / EBITDA surged on 0.7x from -0.2x to 0.5x in 2015. Debt jumped on 81.1% in 2015 while cash increased slightly on 1.7% in 2015.
Management team
The company's CEO is Ma Huateng "Pony". Ma Huateng "Pony" has 19 years tenure at the company. Tencent Holdings Ltd's CFO is Shek Hon Lo "John". Shek Hon Lo "John" has 10 years tenure at the company.
Appendix 1: Peers in Internet
Below you can find Tencent Holdings Ltd benchmarking vs. other companies in Internet industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| China Public Procurement Ltd ($1094) | -78.5% | 5,077.0% | -67.5% | 1,258.9% | |
| China Digital Culture Group Ltd ($8175) | 320.4% | -47.9% | 180.8% | 168.8% | |
| GET Holdings Ltd ($8380) | -4.3% | 13.8% | 2,126.4% | 154.4% | |
| China Healthcare Holdings Ltd ($673) | | -14.8% | -52.9% | 63.1% | 0.3% |
| ABC Multiactive Ltd ($8131) | | -15.2% | -13.2% | 59.4% | -32.4% |
| |
|---|
| Median (19 companies) | 11.2% | 11.9% | 3.7% | 10.7% | 0.3% |
|---|
| Tencent Holdings Ltd ($700) | | 54.0% | 37.7% | 30.6% | 30.3% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| ABC Multiactive Ltd ($8131) | 73.0% | 86.7% | 83.5% | 86.2% | 82.1% |
| Sino-I Technology Ltd ($250) | 74.2% | 75.3% | 82.7% | 78.8% | |
| AcrossAsia Ltd ($8061) | 78.7% | 70.9% | 73.0% | 72.5% | |
| Pacific Online Ltd ($543) | 69.1% | 71.0% | 70.5% | 67.3% | |
| Forgame Holdings Ltd ($484) | 82.1% | 89.8% | 84.7% | 66.1% | |
| |
|---|
| Median (16 companies) | 62.1% | 65.0% | 65.5% | 56.3% | 41.9% |
|---|
| Tencent Holdings Ltd ($700) | 65.2% | 58.5% | 54.0% | 60.9% | 59.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| SUNeVision Holdings Ltd ($8008) | 61.1% | 64.2% | 71.6% | 71.6% | 72.4% |
| GET Holdings Ltd ($8380) | -182.0% | -237.7% | 56.8% | 66.4% | |
| AcrossAsia Ltd ($8061) | 15.4% | 20.8% | 24.2% | 44.7% | |
| China Digital Culture Group Ltd ($8175) | -12.1% | -66.7% | 22.5% | 40.8% | |
| Tradelink Electronic Commerce Ltd ($536) | 42.1% | 38.6% | 33.8% | 33.1% | |
| |
|---|
| Median (20 companies) | 3.0% | 1.4% | 15.2% | 7.3% | -0.9% |
|---|
| Tencent Holdings Ltd ($700) | 48.2% | 38.4% | 34.7% | 42.5% | 43.5% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| SUNeVision Holdings Ltd ($8008) | 14.2% | 7.6% | 10.2% | 62.8% | 12.4% |
| AcrossAsia Ltd ($8061) | 61.2% | 56.6% | 65.9% | 36.3% | |
| China E-Learning Group Ltd ($8055) | 1.3% | 0.0% | 2.7% | 15.3% | |
| Asian Capital Resources Holdings Ltd ($8025) | 0.0% | 0.0% | | 12.2% | |
| Capinfo Co Ltd ($1075) | 1.6% | 17.3% | 13.1% | 9.7% | |
| |
|---|
| Median (20 companies) | 10.8% | 3.2% | 2.7% | 2.7% | 0.2% |
|---|
| Tencent Holdings Ltd ($700) | 14.2% | 9.0% | 8.1% | 5.5% | 8.2% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Pacific Online Ltd ($543) | 41.7% | 37.9% | 36.4% | 28.6% | |
| GET Holdings Ltd ($8380) | -6.8% | -6.5% | 10.8% | 19.3% | |
| Tradelink Electronic Commerce Ltd ($536) | 19.5% | 22.4% | 18.2% | 17.4% | |
| SUNeVision Holdings Ltd ($8008) | 9.9% | 10.8% | 13.3% | 14.4% | 15.3% |
| China Digital Culture Group Ltd ($8175) | -2.3% | -11.2% | 4.0% | 11.7% | |
| |
|---|
| Median (20 companies) | -2.4% | -6.3% | 3.0% | -3.1% | -2.4% |
|---|
| Tencent Holdings Ltd ($700) | 33.4% | 29.5% | 26.7% | 29.1% | 24.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| ABC Multiactive Ltd ($8131) | | | | 9.5x | |
| AcrossAsia Ltd ($8061) | 1.7x | 2.3x | 2.9x | 1.5x | |
| China Digital Culture Group Ltd ($8175) | | | -2.2x | -0.4x | |
| GET Holdings Ltd ($8380) | | | -1.1x | -1.0x | |
| Pacific Online Ltd ($543) | -1.5x | -1.4x | -1.3x | -1.3x | |
| |
|---|
| Median (12 companies) | -2.1x | -1.4x | -1.4x | -1.5x | -1.2x |
|---|
| Tencent Holdings Ltd ($700) | -0.1x | -0.2x | -0.2x | -0.2x | 0.5x |
