Tencent to ‘distribute’ most of its $22bn Meituan stake in dividend


Chinese tech group Tencent on Wednesday stated it might “distribute” the bulk of its $22bn stake in Meituan, a meals supply firm, in dividend, as it really works to cut back its holdings in the nation’s know-how sector.

Tencent’s quarterly income fell for a second quarter, underscoring the toll of Beijing’s bruising regulatory crackdown on the nation’s web sector and the impression of slowing financial development in the world’s second-largest financial system.

The tech group posted quarterly income of Rmb140bn ($19.7bn) in the three months ending September 30, down 2 per cent from the identical interval final 12 months and barely lacking analyst forecasts of Rmb141.4bn. Tencent’s internet revenue elevated 2 per cent to Rmb32.3bn.

“Our resilient businesses, diversified cash flows, sizeable cash balance and substantial investment portfolio enable us to invest in strategic growth areas and innovation, while at the same time returning capital to shareholders,” stated Tencent chair Pony Ma on Wednesday.

“We will distribute the large majority of our Meituan shareholding, which has generated significant returns, both strategically and financially.”

Tencent will distribute $20bn of Meituan shares in March 2023 to shareholders to cut back its publicity to China’s tech sector.

The Financial Times reported in September that Tencent was planning on divesting Rmb100bn of its $88bn listed equity portfolio, together with stakes in Meituan. At the time, Tencent stated it “did not have any target amounts for divestments”.

Tencent has accelerated share repurchases this 12 months, returning money to shareholders as its stock value hovers at a four-year low. So far this 12 months, Tencent has repurchased $13bn of its shares. Tencent’s Hong Kong-listed shares closed 2.2 per cent larger on Thursday.

Analysts stated Tencent’s share buyback programme has prevented additional share value slides. A current rally in Chinese equities due to Beijing loosening its strict zero-Covid coverage and providing help to the property sector has bolstered sentiment.

“A lean, optimised operation combined with potential revenue acceleration ahead — driven by top down factors such as macro and regulations — is a good set-up that investors will like,” stated Charlie Chai, an analyst at Shanghai-based 86 Research.

Tencent is battling the dual challenges of weak client confidence following successive rounds of pandemic lockdowns in China and a wave of new rules that loosened the grip of its tech empire.

The proprietor of the ever-present messaging app WeChat has scaled again its as soon as aggressive pursuit of Chinese web corporations and is divesting massive chunks of its portfolio, sending reverberations by way of the nation’s tech business.

Revenue from internet advertising fell 5 per cent to Rmb21.5bn as corporations slashed advertising and marketing budgets.

Analysts recommend that officers could also be taking a softer strategy to the gaming sector after regulators restricted youngsters’s enjoying time and halted approvals for brand spanking new sport titles in the summer time final 12 months.

In September Tencent gained its first licence for a brand new gaming title since June 2021, easing investor considerations in regards to the dearth of approvals granted to Chinese web teams.

Tencent stated it had change into “fully compliant” with Chinese rules on gaming for minors and that the time spent by youngsters on its video games plummeted 92 per cent in the third quarter in contrast with the identical interval final 12 months. Tencent president Martin Lau stated throughout the investor name on Wednesday that the corporate “believed more licenses will be forthcoming in the future”.

In an indication that Beijing’s crackdown could also be easing, the People’s Daily, China’s state media, on Wednesday printed an opinion piece saying that the gaming business can “support the development of advanced technologies” and “play a more important role in enhancing the global influence of Chinese culture”.

This stands in marked distinction to an article on a information web site owned by the state information company Xinhua final 12 months, which criticised on-line video video games as a kind of “spiritual opium worth hundreds of billions”.

Chai stated traders had “a greater peace of mind as the overall political agenda moves away from regulation to pro-growth policies”.

Additional reporting by Nian Liu in Beijing and Cheng Leng in Hong Kong

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