After the spin-off of JD.com Group (09618.HK) to directly distribute dividends to shareholders, Tencent Holdings (00700.HK) still holds nearly one trillion yuan in market value of listed companies on the book. Earnings also sparked heated discussions among market participants.
The financial report released on the evening of March 23 shows that in the fourth quarter of 2021, Tencent’s total revenue was 144.188 billion yuan, an increase of 8% year-on-year; gross profit was 57.817 billion yuan, a year-on-year decrease of 2% and a month-on-month decrease of 8%; net profit (Non-IFRS) 24.88 billion yuan, down 25% year-on-year, and net profit has declined for two consecutive quarters.
In early trading on March 24, Tencent’s shares fell 3.03% to close at HK$377.2.
A senior Hong Kong stock fund manager in Shenzhen told the First Financial Reporter that most investors currently feel that profits in the fourth quarter fell by 25%. Tencent needs to sell JD.com to maintain profit growth. This is more regarded as a one-time factor rather than normal operating profit. Growth, so in the short term, the market view is negative and the stock price falls.
Will Tencent's holdings of Meituan (03690.HK), Pinduoduo (PDD) and other stocks be handled in the same way as JD.com?
This has aroused certain associations in the market. Some market participants believe that if these stocks are sold or used for dividends, Tencent can continue to confirm earnings in the future.
The financial report shows that Tencent’s disposal and deemed disposal income in 2021 will be about 118.051 billion yuan, including 78 billion yuan from the disposal of Jingdong Group’s shares, and 11.6 billion yuan from the change in accounting policies of one of its game companies. 3.8 billion yuan in income from the transformation, as well as other changes in value.
As of December 31, 2021, the fair value of Tencent's equity in listed investment companies (excluding subsidiaries) was 982.8 billion yuan.
According to the 2020 annual report, as of the end of the year, the fair value of Tencent’s listed investment companies (excluding subsidiaries) reached 1,204.931 billion yuan, compared with 419.818 billion yuan earlier in the same period in 2019.
It can be seen that from the end of 2019 to the end of 2021, with the ups and downs of the stock market, Tencent's market value of listed companies has also experienced certain ups and downs.
Taking Meituan as an example, Tencent Holdings currently holds less than 18% of the shares, with a stock market value of about HK$170 billion (more than HK$200 billion based on the stock price at the end of 2021); Tencent holds about 16.5% of Pinduoduo, which is held at the latest closing price. The stock market is worth more than $10 billion.
On December 23, 2021, Tencent announced that it plans to distribute its 457 million shares of JD.com to shareholders as an interim dividend.
After the distribution is completed, Tencent’s share of JD.com shares will drop from 17% to 2.3%, and Tencent Holdings President Liu Chiping will also step down as a director of JD.com.
The financial report released on March 23 showed that the shares of Jingdong Group’s shares distributed in kind are expected to be distributed to eligible shareholders in March this year.
Tencent said: When the invested company has the ability to continuously raise funds, it will choose to withdraw from the investment under appropriate circumstances and share the profits with shareholders.
Therefore, "We believe that now is the right time to use an appropriate method to directly share the results of our investment in JD.com with Tencent shareholders. Although our direct stake in JD.com has been significantly reduced, JD.com will remain our important strategic partner." .
A person from a Hong Kong investment bank told the first financial reporter that Tencent's allocation of JD.com shares belongs to the technology field, and this time it is not a spin-off listing. This approach is more similar to this year's Dell Technologies (DELL) spin-off of virtualization and cloud service providers VMware (VMW), as a dividend to Dell shareholders.
In the long run, there are still many companies in which Tencent holds shares. In the future, if it is gradually split, it can actually generate continuous income. If it is directly sold the stock to bring cash in the company, it can also reinvest or buy back its own shares.
Looking ahead, analysts believe that Tencent's long-term development lies in the business transformation from 2C (personal customers) to 2B (enterprise customers).
Shi Weijing, an analyst at Dongxing Securities, said that in terms of strategy, Tencent Holdings executives have a strong sense of crisis. They implemented organizational structure adjustments in 2005 and 2012, so as to enjoy the development dividends of PC Internet and mobile Internet. .
Debon Securities analyst Zhao Weibo believes that in terms of growth logic, cloud computing is the product of the division of labor in the IT industry, which conforms to objective economic laws and has strong certainty.
In a longer cycle, Tencent's solution "smart retail" in the retail industry is expected to benefit from the prosperity of WeChat's business ecosystem in the long run.
The core logic of the smart retail solution is to transfer Tencent's 2C capabilities to B-end customers, so that they can operate privately in the WeChat ecosystem.
At the financial report conference, Liu Chiping said that the transformation process from the C-side business to the B-side business and when the 2B business will become the core pillar of the group's profits, the 2B business will take a long time, and the C-side and B-side businesses complement each other. China's 2C Internet value-added charging model is also applicable to the B-side, and there is no game relationship between the two.