Tencent Holdings Ltd Net Income jumped on 74.0% and Revenue surged on 56.5%
21/03/2018 • About Tencent Holdings Ltd (
$700) • By InTwits
Tencent Holdings Ltd reported 2017 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: 2017 revenue growth was 56.5%, 5 year revenue CAGR was 40.2% at 2017 ROIC 23.7%
- Tencent Holdings Ltd has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.7%. At the same time it's a lot of higher than industry average of 4.2%.
- CAPEX is quite volatile: 12,154 in 2017, 9,905 in 2016, 8,485 in 2015, 4,319 in 2014, 4,881 in 2013
- The company has highly profitable business model: ROIC is at 23.7%
- It operates with high leverage: Net Debt/EBITDA is 0.2x while industry average is -0.7x
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 | 2013 | 2014 | 2015 | 2016 | 2017 | 2017/2016 |
|---|
P&L
|
|---|
| Revenue | 60,437 | 78,932 | 102,863 | 151,938 | 237,760 | 56.5% |
| Gross Profit | 32,659 | 48,059 | 61,232 | 84,499 | 116,925 | 38.4% |
| SG&A | 14,740 | 20,859 | 23,409 | 32,739 | 48,851 | 49.2% |
| EBITDA | 20,977 | 33,540 | 44,702 | 65,676 | 108,260 | 64.8% |
| Net Income | 15,502 | 23,810 | 28,806 | 41,095 | 71,510 | 74.0% |
Balance Sheet
|
|---|
| Cash | 20,228 | 42,713 | 43,438 | 71,902 | 105,697 | 47.0% |
| Short Term Debt | 2,589 | 5,049 | 15,315 | 15,744 | 20,448 | 29.9% |
| Long Term Debt | 12,464 | 31,024 | 50,014 | 93,753 | 111,457 | 18.9% |
Cash flow
|
|---|
| Capex | 4,881 | 4,319 | 8,485 | 9,905 | 12,154 | 22.7% |
Ratios
|
|---|
| Revenue growth | 37.7% | 30.6% | 30.3% | 47.7% | 56.5% | |
| EBITDA growth | 24.4% | 59.9% | 33.3% | 46.9% | 64.8% | |
| Gross Margin | 54.0% | 60.9% | 59.5% | 55.6% | 49.2% | -6.4% |
| EBITDA Margin | 34.7% | 42.5% | 43.5% | 43.2% | 45.5% | 2.3% |
| Net Income Margin | 25.6% | 30.2% | 28.0% | 27.0% | 30.1% | 3.0% |
| SG&A, % of revenue | 24.4% | 26.4% | 22.8% | 21.5% | 20.5% | -1.0% |
| CAPEX, % of revenue | 8.1% | 5.5% | 8.2% | 6.5% | 5.1% | -1.4% |
| ROIC | 26.7% | 29.1% | 24.3% | 21.6% | 23.7% | 2.2% |
| ROE | 31.2% | 34.5% | 28.8% | 27.9% | 33.2% | 5.3% |
| Net Debt/EBITDA | -0.2x | -0.2x | 0.5x | 0.6x | 0.2x | -0.3x |
Tencent Holdings Ltd ($700) key quoterly financial indicators
| mln. CNY | 17Q1 | 17Q2 | 17Q3 | 17Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 49,552 | 56,606 | 65,210 | 66,392 | 54.9% | 58.6% | 61.5% | 51.4% |
| EBITDA | 22,503 | 27,448 | 27,872 | 30,437 | 51.9% | 65.8% | 68.1% | 71.6% |
| Net Income | 14,476 | 18,231 | 18,006 | 20,797 | 57.6% | 69.8% | 69.1% | 97.5% |
Balance Sheet
|
|---|
| Cash | 68,861 | 70,301 | 87,343 | 105,697 | 21.6% | 9.5% | 66.6% | 47.0% |
| Short Term Debt | 19,470 | 14,838 | 20,733 | 20,448 | 19.9% | -14.5% | 4.2% | 29.9% |
| Long Term Debt | 94,814 | 101,754 | 111,202 | 111,457 | 70.3% | 50.5% | 54.3% | 18.9% |
Ratios
|
|---|
| Gross Margin | 51.3% | 50.0% | 48.6% | 47.4% | -6.8% | -7.3% | -5.5% | -6.4% |
| EBITDA Margin | 45.4% | 48.5% | 42.7% | 45.8% | -0.9% | 2.1% | 1.7% | 5.4% |
| Net Income Margin | 29.2% | 32.2% | 27.6% | 31.3% | 0.5% | 2.1% | 1.3% | 7.3% |
Revenue and profitability
Tencent Holdings Ltd's Revenue jumped on 56.5%. Revenue growth showed slow down in 17Q4 - it was 51.4% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.3 pp from 43.2% to 45.5% in 2017.
Gross Margin decreased on 6.4 pp from 55.6% to 49.2% in 2017. SG&A as a % of Revenue decreased slightly on 1.0 pp from 21.5% to 20.5% in 2017.
Net Income marign increased on 3.0 pp from 27.0% to 30.1% in 2017.
Capital expenditures (CAPEX) and working capital investments
In 2017 Tencent Holdings Ltd had CAPEX/Revenue of 5.1%. The company showed almost no change in CAPEX/Revenue from 2014 to 2017. It's average CAPEX/Revenue for the last three years was 6.6%.
Return on investment
The company operates at high and attractive ROIC (23.71%) and ROE (33.21%). ROIC increased on 2.2 pp from 21.6% to 23.7% in 2017. ROE increased on 5.3 pp from 27.9% to 33.2% in 2017.
Leverage (Debt)
Debt level is 0.2x Net Debt / EBITDA and 1.2x Debt / EBITDA. Net Debt / EBITDA dropped on 0.3x from 0.6x to 0.2x in 2017. Debt surged on 20.5% while cash jumped on 47.0%.
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 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| ABC Multiactive Ltd ($8131) | -13.2% | 59.4% | -32.4% | 38.0% | |
| Cogobuy Group ($400) | | 183.3% | 38.0% | 36.8% | |
| Ourgame International Holdings Ltd ($6899) | 14.8% | 101.3% | 61.8% | 13.2% | |
| SUNeVision Holdings Ltd ($8008) | 8.3% | 10.7% | 8.5% | 8.8% | |
| Capinfo Co Ltd ($1075) | 43.5% | 0.3% | 16.2% | 5.7% | |
| |
|---|
| Median (11 companies) | 8.3% | 13.0% | 9.8% | 2.9% | |
|---|
Top companies by Gross margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Sino-I Technology Ltd ($250) | 82.7% | 78.8% | 82.8% | 82.9% | |
| ABC Multiactive Ltd ($8131) | 83.5% | 86.2% | 82.1% | 74.8% | |
| SUNeVision Holdings Ltd ($8008) | 60.5% | 64.7% | 65.6% | 63.9% | |
| Prosten Technology Holdings Ltd ($8026) | 47.8% | 50.8% | 67.1% | 53.8% | |
| DX.com Holdings Ltd ($8086) | 39.7% | 39.7% | 41.9% | 36.7% | |
| |
|---|
| Median (8 companies) | 66.2% | 61.7% | 45.7% | 45.3% | |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| SUNeVision Holdings Ltd ($8008) | 71.6% | 71.6% | 72.4% | 68.9% | |
| Media Asia Group Holdings Ltd ($8075) | 18.6% | 13.4% | 25.1% | 14.2% | |
| Cogobuy Group ($400) | 5.4% | 4.0% | 4.7% | 5.0% | |
| Sino-I Technology Ltd ($250) | 2.6% | -6.3% | 3.6% | 2.8% | |
| ABC Multiactive Ltd ($8131) | -17.0% | 21.9% | -2.8% | -8.7% | |
| |
|---|
| Median (8 companies) | 16.9% | 13.4% | 7.2% | -2.9% | |
|---|
Top companies by CAPEX/Revenue, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| SUNeVision Holdings Ltd ($8008) | 10.2% | 62.8% | 12.4% | 41.1% | |
| Prosten Technology Holdings Ltd ($8026) | 2.3% | 4.4% | 0.3% | 3.9% | |
| ABC Multiactive Ltd ($8131) | 0.8% | 0.1% | 1.4% | 3.9% | |
| Media Asia Group Holdings Ltd ($8075) | 1.5% | 2.3% | 0.1% | 0.8% | |
| DX.com Holdings Ltd ($8086) | 0.3% | 0.3% | 0.2% | 0.1% | |
| |
|---|
| Median (6 companies) | 2.5% | 1.7% | 0.8% | 2.4% | |
|---|
Top companies by ROIC, %
| Top 5 | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| SUNeVision Holdings Ltd ($8008) | 13.3% | 14.4% | 15.3% | 15.3% | |
| Cogobuy Group ($400) | 13.5% | 12.1% | 11.8% | 10.5% | |
| Sino-I Technology Ltd ($250) | -3.5% | -8.2% | -1.3% | -1.7% | |
| Media Asia Group Holdings Ltd ($8075) | -3.3% | -5.9% | 4.0% | -5.6% | |
| Tai Shing International Holdings Ltd ($8103) | -40.8% | -74.3% | 0.3% | -19.5% | |
| |
|---|
| Median (13 companies) | 4.0% | -1.3% | 1.0% | -5.6% | |
|---|
Top companies by Net Debt / EBITDA
| Top | FY2013 | FY2014 | FY2015 | FY2016 | FY2017 |
|---|
| Sino-I Technology Ltd ($250) | 9.4x | | 4.1x | 3.1x | |
| Cogobuy Group ($400) | 5.0x | 0.7x | 2.4x | 3.1x | |
| SUNeVision Holdings Ltd ($8008) | -2.0x | -1.5x | -1.2x | -0.7x | |
| Media Asia Group Holdings Ltd ($8075) | 1.1x | -2.6x | -2.7x | -2.7x | |
| |
|---|
| Median (4 companies) | -1.1x | -1.5x | -1.7x | 1.2x | |
|---|
