Tencent 1Q numbers - still massive growth

Tencent reported numbers in the late morning yesterday. Tencent is difficult for most investors to understand. I don't talk for all investors, perhaps investors spend more time reading than they do partaking in role-player or single shooter games either on their PC or on their mobile phone. Plus, many investors in Naspers/Tencent do not get to experience the entire experience from the company, as it is in a different language and in many respects a closed off internet society, if that makes sense.

The numbers for revenues and profits sharply exceeded expectations, Tencent has responded in kind this morning with a roaring nearly four percent gain. And that must be received against the backdrop of global markets all selling off sharply. I suspect that with the weaker Rand and with this share price movement, that Naspers may well be comfortably ahead of the rest of the market today, as some selling pressure may transpire from "other quarters".

For such a large company it is pleasing to see them grow comfortably into their earnings, revenues were 55 percent higher than the prior financial year, 7.182 billion Dollars for the quarter. Basic earnings per share were 1.54 Renminbi, which translates to 1.74 Hong Kong Dollars. Expectations this year are for above 7 Hong Kong Dollars worth of earnings, at 270 Hong Kong Dollars, the stock trades almost constantly higher at 35 odd times forward. Expectations are for EPS growth of 30 percent this year and then nearly the same the year after, still, this is a tricky stock to value. Entertainment in China, that is what the long term future of this business is. I reckon that there is great scope for growth and we maintain our buy (indirectly) of Naspers, even at higher and elevated levels.