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OCBC says it prefers Tencent Holdings over Alibaba upon 'firm set of 3Q results', raises TP to HK$687

Felicia Tan
Felicia Tan11/16/2020 11:36 AM GMT+08  • 2 min read
OCBC says it prefers Tencent Holdings over Alibaba upon 'firm set of 3Q results', raises TP to HK$687
OCBC's analysts have maintained "buy" on the counter with a raised fair value estimate of HK$687.
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In its market commentary dated Nov 13, OCBC Investment Research analysts say they prefer Tencent Holdings over its peer Alibaba, after the former posted a “firm set of 3Q results” on Nov 12.

For the 3QFY2020, Tencent posted a 32% growth y-o-y in earnings of RMB32.3 billion ($6.6 billion). Operating profit was up 34% y-o-y to RMB38.1 billion, while operating profit margin rose 1 percentage point to 30% from 29% the year before.

Total revenue for the quarter rose 29% y-o-y to RMB125.4 billion, which came above consensus’ estimates by 1%.

Tencent’s mobile game segment surged 61% y-o-y to RMB39.2 billion, benefitting from robust growth of its existing titles and recognition of deferred revenue from the stay-at-home period during Covid-19.

“We believe the main concern for investors going into the print were around the recent regulatory developments, and we believe management has addressed this comprehensively,” say the analysts.

“As it relates to the consultation paper pertaining to the regulation of online micro credit companies, management noted that compliance with regulations and prudent risk management via the controlled scale of fintech products (to optimise for quality rather than volume) is already being adhered to, and therefore do not foresee major changes to the company’s strategy,” they add.

On that, the analysts have maintained their “buy” recommendation on the stock with a raised fair value estimate of HK$687 ($119.35) from HK$619 previously.

Shares in Tencent are currently trading HK$5.50 lower or 0.9% down at HK$596.50.

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