- Published on
Third week of July 2024
- Authors
- Name
- Sean
Warning
You probably know that I don't make stock recommendations, it is solely a record of my personal investment. Any action or opinion in the article may not be correct. Any investment targets mentioned in the article carry the risk of significant short-term declines. Please think independently and rationally!
Csah Dividends
| Exchange | Symbol | Date | Amount |
|---|---|---|---|
| NYSE | BABA | 2024/07/15 | 32.80 USD |
Latest Stock Portfolio
| Exchange | Symbol | Ratio | Reasonable Valuation1 | Current Mkt Cap1 | Stock Price | Stock Price Increase This Year |
|---|---|---|---|---|---|---|
| HKEX2 | 00700 | 82% | <3,200 | 3,393 | 364.00 | 25.43% |
| NYSE3 | BABA | 13% | <180 | 179 | 75.27 | -0.78% |
| --- | Current Assets | 5% |
Annual Change Rates
| Year | Net Asset Value | Portfolio4 | S&P 500 | Hang Seng |
|---|---|---|---|---|
| 2023 | 0.93 | -10.95% | 24.23% | -13.82% |
| 2024 | 1.14 | 29.82% | 15.41% | 2.17% |
Important Matters
1.Outlook for Tencent's Game Business in Q2 2024 and Beyond
From Q2 2021 to Q1 2024, the revenue situation of Tencent's gaming business over these 12 quarters is as follows:
Tencent's gaming revenue has shown significant quarterly fluctuations and has experienced negative year-over-year growth for two consecutive quarters, mainly due to the impact of domestic game revenue, which accounts for more than 70% of Tencent's total gaming revenue. The negative year-over-year growth in domestic game revenue for two consecutive quarters has dragged down Tencent's overall gaming revenue (as shown in the figure below):
It is foreseeable that this trend will change starting from the second quarter. On the one hand, by the end of Q1 2024, Tencent's deferred income reached 106.1 billion yuan, an increase of nearly 10 billion yuan year-over-year and nearly 20 billion yuan compared to the end of 2023. This significant growth in deferred income will be gradually recognized as actual revenue in the coming quarters, positively affecting the growth of the gaming business.
On the other hand, Tencent's gaming performance in the first half of 2024 has been impressive. The Q1 financial report shows that the total gaming revenue was 48.1 billion yuan, with international market gaming revenue growing by 3% year-over-year to 13.6 billion yuan, and the total turnover growing by 34% year-over-year. With the gradual release of deferred income and the launch of new games, Tencent's gaming business is expected to recover in the second quarter of 2024 and is likely to accelerate growth in the second half of the year. We can judge based on some market research institute's estimated data:
From a single game perspective, in the first half of 2024, Tencent almost occupies half of the global mobile game revenue TOP 20 list. According to the global game revenue list published by mobile application market research institution Appmagic in the first half of 2024 (only App Store and Google Play revenue is counted) as shown in the figure below:
In the first half of the year's global mobile game revenue TOP 10, Tencent's "Honor of Kings" and "PUBG Mobile" respectively ranked first and fourth with revenues of $961 million and $615 million, respectively. These two games continue to show strong money-making capabilities, consolidating Tencent's leading position in the global mobile gaming market.
It is worth mentioning that although "DNF Mobile" was just released in May this year, it achieved a revenue of $163 million in just one month, and the total revenue reached $257 million in two months. Although it is currently ranked 15th, it tops the revenue growth list, showing strong growth potential. According to the current development trend, it is expected that by the end of the year, "DNF Mobile" will enter the top three of the global mobile game revenue list.
In addition, Tencent's another game "Jinchanchan Zhan" is ranked 17th with a revenue of $211 million. It is worth mentioning that Tencent also obtained part of the rights to the games "Clash Royale" and "Clash of Clans" through the investment in Supercell, and these two games achieved revenues of $319 million and $202 million, respectively, ranking 12th and 18th on the list.
In addition to the games it directly owns, Tencent has also strategically invested in many other successful mobile games, making it occupy half of the global mobile game revenue TOP 20. This achievement not only highlights Tencent's leadership in the mobile game field but also shows investors its diversified layout and robust growth strategy in the gaming industry.
From the perspective of game publishers, the same data from Appmagic shows the top 10 global mobile game publishers by revenue in the first half of 2024:
Tencent, with a revenue of $3.2 billion, leads the global mobile game revenue ranking by a wide margin. This figure is more than three times that of the second place and is almost equivalent to the total revenue of the second to fifth places combined. This achievement highlights Tencent's dominant position in the global mobile game market and its excellent profitability.
It is worth mentioning that Supercell, acquired by Tencent, ranked sixth on the list with a revenue of $753 million, which is a bright spot. During 2023, Supercell's monthly revenue was maintained between $60 million and $65 million, but since April this year, the strong performance of "Clash Royale" has driven Supercell's monthly revenue to about $130 million, further enhancing its market competitiveness.
This series of achievements not only demonstrates the strong strength of Tencent and its portfolio but also provides confidence to investors, proving the effectiveness of Tencent's investment and management strategies in the global mobile game field.
Let's compare the annual revenue data of the previous year 2023:
According to the data statistics from AppMagic, in 2023, the revenue of Tencent's mobile games was about $4.88 billion. In the first half of 2024, Tencent's game revenue has reached $3.2 billion, which is 65.6% of the annual revenue in 2023. This significant increase not only reflects the strong performance of Tencent's gaming business but also provides confidence to investors.
It should be noted that there is a difference between the above revenue data and the revenue data in Tencent's financial report. First, the above data does not include revenue from third-party Android channels. Second, these data reflect the turnover income, while the revenue in the financial report is a number adjusted according to accounting standards. A part of the turnover income will be recognized as revenue, and another part will be temporarily recorded as "deferred income."
Therefore, it can be expected that in the 2024 interim report, "deferred income" will have a significant increase, laying a solid foundation for the continuous growth in the second half of the year and the whole year. Tencent's gaming business revenue in the first half and second quarter of 2024 has achieved a positive year-on-year growth, indicating that the growth momentum will continue in the next few quarters.
At the developer conference on this Tuesday (July 16), the WeChat Mini Games team released the latest data, showing its impressive user engagement and growth potential:
- User scale: The user scale of WeChat Mini Games has reached 1 billion, with 500 million monthly active users.
- User activity: Users spend an average of about an hour online every day, and the 14-day retention rate exceeds 50%.
- User behavior: More than half of the users start Mini Games through private domain scenarios such as WeChat pull-down and session sharing, indicating that users are actively exploring and enjoying their favorite Mini Games. This behavioral pattern indicates that playing a Mini Game in leisure moments has become a daily habit for users.
Previously, in the financial report for the first quarter of 2024, Tencent disclosed that the turnover of Mini Games increased by 30% year-over-year. In addition, according to public media reports, WeChat Mini Games' share of turnover is 40%, and the gross margin is as high as 95%.
Looking at the performance of WeChat Mini Games in the first half of the year, it is expected to make a significant contribution to Tencent's "online advertising business" and "social networking business". With more than three weeks to go before Tencent releases its interim financial report for 2024, the specific revenue situation is worth looking forward to.
2.WeChat Installment and Payment, Another Source of Revenue for Tencent's Financial Technology Business
In 2023 and the first quarter of 2024, Tencent's financial technology business achieved double-digit and single-digit year-on-year growth, respectively. The business revenue mainly comes from two major segments:
- Commercial payment business:
- Represented by WeChat Pay, the revenue mainly comes from handling fees, including online payments (standard rate of 0.6%), offline payments (standard rate of 0.38%), credit card repayments (0.1% of the repayment amount), and withdrawal handling fees, etc. Among them, online and offline payments are the main sources of income, while withdrawal handling fees are considered low-quality one-time income sources.
- Non-payment business:
- Mainly includes financial services, such as low-risk money market funds and fixed-income mutual funds.
- In addition, Tencent also provides installment payment and loan services, which have high profit margins and added value.
In wealth management and consumer loans, Tencent benefits from lower customer acquisition costs and credit costs, enabling the company to create better economic benefits for consumers, partners, and itself. With a large customer base and a growing total customer asset amount, Tencent can obtain more low-yield but high-profit handling fee income.
It is worth noting that Tencent is gray-scale testing two self-operated consumer credit products - "Installment" and "Payment". These two products are similar to Alibaba's "Huabei" or JD.com's "Baitiao", aiming to provide users with credit solutions based on consumption scenarios. Among them:
- WeChat "Installment":
- Large amount, available for consumption over 500 yuan, supports installment repayment for 3 months, 6 months, and 12 months.
- The annualized interest rates are 13.75%, 14.26%, and 14.45%, respectively.
- For early repayment, you need to repay the remaining amount in one lump sum.
- WeChat "Payment":
- Positioned as a small consumer loan product, focusing on "starting from 1 yuan, available for use and repayment at any time."
- The annualized interest rate is 14.6%, and you can repay any amount at any time, with no handling fee for early repayment.
- Although Tencent has been cautious in the consumer finance field, the contribution of "Installment" and "Payment" to performance in the short term may not be significant, but in the long run, these products are expected to become an important growth point of the financial technology business. Tencent's advantage lies in lower customer acquisition costs and efficient business risk management. Coupled with the rapid development of live-commerce on Video Account, it will provide more application scenarios for "Installment" and "Payment", promoting the continuous growth of the financial technology business.
3.Timeline of Alibaba's Main Listing Conversion and Inclusion in Hong Kong Stock Connect
On July 2nd, 2024, the Hang Seng Index Company announced the upcoming declaration of the Hang Seng Index Series review results for the second quarter of 2024, scheduled for August 16th, 2024, with the changes to the constituent stocks taking effect on September 9th, 2024. Alibaba Group is anticipated to be included in the Hong Kong Stock Connect on this date, signifying that if the dual-primary listing is successfully completed by the end of August, this timeline will be confirmed.
Shareholders Meeting Schedule and Agenda:
- Date: July 5th, 2024, Alibaba issued a notice for its annual general meeting of shareholders, which is set to be held on August 22nd, 2024, earlier than the usual timing of late August or late September in previous years.
- Agenda: The meeting will cover six agenda items, comprising one special resolution and five ordinary resolutions. These include amendments to the company's constitutional documents, general authorization for the issuance of up to 10% of the share capital, general authorization for the repurchase of up to 10% of the share capital, the 2024 equity incentive plan, director elections, and the appointment of an accounting firm.
Relevant Proposals for the Main Listing Conversion:
- New Proposals: Compared to the past two years' notices, four new proposals have been added to this year's meeting, which are closely related to the preparation for the main listing conversion. These include the authorization for new share issuance, buyback authorization, and the equity incentive plan.
- Purpose and Significance: The purpose of these proposals is to ensure the company's compliance with the listing rules of the Hong Kong Stock Exchange. Approval of these proposals at the shareholders' meeting will meet the conditions for the company to transition to a primary listing in Hong Kong, pending final approval from the Stock Exchange.
Given the Hong Kong Stock Exchange's significant rule changes in the past to attract Alibaba to list in Hong Kong, including allowing companies with weighted voting rights structures, it is anticipated that the main listing conversion will receive approval. The successful conversion of Alibaba to a primary listing in Hong Kong will not only enhance the company's status in the Hong Kong capital market but also attract attention and support from mainland investors.