Tencent Holdings Ltd revenue surged on 47.7% in 2016 and EBITDA Margin showed almost no change
22/03/2017 • About Tencent Holdings Ltd (
$700) • By InTwits
Tencent Holdings Ltd reported 2016 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: 2016 revenue growth was 47.7%, 5 year revenue CAGR was 39.8% at 2016 ROIC 21.6%
- Tencent Holdings Ltd has medium CAPEX intensity: 5 year average CAPEX/Revenue was 7.5%. At the same time it's a lot of higher than industry average of 4.1%.
- CAPEX is quite volatile: 9,905 in 2016, 8,485 in 2015, 4,319 in 2014, 4,881 in 2013, 3,970 in 2012
- The company has highly profitable business model: ROIC is at 21.6%
- It operates with high leverage: Net Debt/EBITDA is 0.6x while industry average is -2.1x
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 | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 43,894 | 60,437 | 78,932 | 102,863 | 151,938 | 47.7% |
| Gross Profit | 25,686 | 32,659 | 48,059 | 61,232 | 84,499 | 38.0% |
| SG&A | 9,902 | 14,740 | 20,859 | 23,409 | 32,739 | 39.9% |
| EBITDA | 16,857 | 20,977 | 33,540 | 44,702 | 65,676 | 46.9% |
| Net Income | 12,732 | 15,502 | 23,810 | 28,806 | 41,095 | 42.7% |
Balance Sheet
|
|---|
| Cash | 13,383 | 20,228 | 42,713 | 43,438 | 71,902 | 65.5% |
| Short Term Debt | 1,077 | 2,589 | 5,049 | 15,315 | 15,744 | 2.8% |
| Long Term Debt | 9,622 | 12,464 | 31,024 | 50,014 | 93,753 | 87.5% |
Cash flow
|
|---|
| Capex | 3,970 | 4,881 | 4,319 | 8,485 | 9,905 | 16.7% |
Ratios
|
|---|
| Revenue growth | 54.0% | 37.7% | 30.6% | 30.3% | 47.7% | |
| EBITDA growth | 22.8% | 24.4% | 59.9% | 33.3% | 46.9% | |
| Gross Margin | 58.5% | 54.0% | 60.9% | 59.5% | 55.6% | -3.9% |
| EBITDA Margin | 38.4% | 34.7% | 42.5% | 43.5% | 43.2% | -0.2% |
| Net Income Margin | 29.0% | 25.6% | 30.2% | 28.0% | 27.0% | -1.0% |
| SG&A, % of revenue | 22.6% | 24.4% | 26.4% | 22.8% | 21.5% | -1.2% |
| CAPEX, % of revenue | 9.0% | 8.1% | 5.5% | 8.2% | 6.5% | -1.7% |
| ROIC | 29.5% | 26.7% | 29.1% | 24.3% | 21.6% | -2.7% |
| ROE | 36.5% | 31.2% | 34.5% | 28.8% | 27.9% | -0.9% |
| Net Debt/EBITDA | -0.2x | -0.2x | -0.2x | 0.5x | 0.6x | 0.1x |
Tencent Holdings Ltd ($700) key quoterly financial indicators
| mln. CNY | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 31,995 | 35,691 | 40,388 | 43,864 | | | | |
| EBITDA | 14,816 | 16,551 | 16,576 | 17,733 | | | | |
| Net Income | 9,183 | 10,737 | 10,646 | 10,529 | | | | |
Balance Sheet
|
|---|
| Cash | 56,607 | 64,206 | 52,417 | 71,902 | | | | |
| Short Term Debt | 16,242 | 17,362 | 19,893 | 15,744 | | | | |
| Long Term Debt | 55,688 | 67,615 | 72,075 | 93,753 | | | | |
Ratios
|
|---|
| Gross Margin | 58.1% | 57.3% | 54.0% | 53.9% | | | | |
| EBITDA Margin | 46.3% | 46.4% | 41.0% | 40.4% | | | | |
| Net Income Margin | 28.7% | 30.1% | 26.4% | 24.0% | | | | |
Revenue and profitability
The company's Revenue surged on 47.7%. EBITDA Margin showed almost no change in 2016.
Gross Margin decreased on 3.9 pp from 59.5% to 55.6% in 2016. SG&A as a % of Revenue decreased slightly on 1.2 pp from 22.8% to 21.5% in 2016.
Net Income marign decreased slightly on 0.96 pp from 28.0% to 27.0% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 6.5% in 2016. The company showed small CAPEX/Revenue decline of 1.6 pp from 8.1% in 2013 to 6.5% in 2016. Average CAPEX/Revenue for the last three years was 6.7%.
Return on investment
The company operates at high and attractive ROIC (21.56%) and ROE (27.89%). ROIC decreased on 2.7 pp from 24.3% to 21.6% in 2016. ROE decreased slightly on 0.91 pp from 28.8% to 27.9% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.6x and Debt / EBITDA is 1.7x. Net Debt / EBITDA increased on 0.1x from 0.5x to 0.6x in 2016. Debt jumped on 67.6% while cash surged on 65.5%.
Management team
Tencent Holdings Ltd's CEO Ma Huateng "Pony" has spent 19 years at the company. The company's CFO Shek Hon Lo "John" has spent 10 years at the company.
Appendix 1: 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, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| 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% |
|---|
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| 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% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| 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% |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| 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% |
|---|
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| 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% |
|---|
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Tai Shing International Holdings Ltd ($8103) | | | | 82.7x | |
| AcrossAsia Ltd ($8061) | 2.3x | 2.9x | 1.5x | 7.7x | |
| Sino-I Technology Ltd ($250) | | 9.4x | | 4.1x | 3.1x |
| Cogobuy Group ($400) | | 5.0x | 0.7x | 2.4x | 3.1x |
| GET Holdings Ltd ($8380) | | -1.1x | -1.0x | 0.7x | |
| |
|---|
| Median (15 companies) | -1.6x | -1.1x | -1.5x | -1.7x | 1.2x |
|---|
