Analysis of Tencent 2019 Annual Financial Statements

Tencent released 2019 financial statements this month. Since the beginning of the coronavirus epidemic, the App portfolio of Tencent played more and more important role for everyone’s daily life. So Tencent 2019 financial statedments is highly expected.

From 4Q19 and Annual Results Presentation

As we can see from above graph, the key performance indicators, such as revenue, profit, etc, grew by more than 20%. So Tencent still keeps high growing pace in the elephant size. The operating margin is 30%, more than most companies profitability.

From 4Q19 and Annual Results Presentation

As I have discussed in Tencent, Fostering Connecting Ecosystem to Serve Enterprises and Consumers, the business moat of Tencent is the two largest communication and social plat forms in China. Until Q4 2019, the number of users from Wechat is 1,165 million and the number of QQ users is 1,374 million. In China, nearly all the Chinese have wechat and QQ number to communcate and share interesting things with their friends.

As long as Wechat and QQ keeps the leading position in the consumer internet, Tencent can provide more services by getting traffic from the two social platform.

From the business segmentation, we can see there are three main parts: Value Added Services, Online Advertising, Fintech and Business Services. As I said before , the value added service is the cash cow of Tencent and takes more than half of the whole revenue, the ratio is unchanged in 2019 financial statements. 

The value added service have social networks and online gaming. 

Tencent focus in social networks is strengthening connections between users via digital content, online services, and offline services, as well as enhancing connections with enterprises leveraging Mini Programs, Weixin Pay and WeChat Work.  To strengthen connections with enterprises, Tencent facilitated discovery of merchants’ Mini Programs and sales conversion by enhancing Weixin in-app search and live broadcast functions. The number of daily transactions generated within Mini Programs more than doubled year-on-year, and their transaction value exceeded RMB800 billion in 2019.

In online games business, Tencent focus on enhancing our internal R&D capability and external partnerships, and expanding our overseas business. During 2019, Tencent extended China leadership and made notable progress in overseas business, largely due to the success of games PUBG Mobile and Call of Duty Mobile, as well as the new mode Teamfight Tactics within LoL. Tencent international games revenues more than doubled year-on-year, constituting 23% of online games revenue in the fourth quarter of 2019. As of the end of 2019, five out of the top ten most-popular smart phone games by DAU internationally were developed by Tencent. 

Online advertising is the second business part. Leveraging Tencent largest social platform, Tencent have taken substantial market share in ad networks. In 2019, the revenue of online advertising is still growing by 18% year on year, however, the social ad grows fast by 37% and media ad was down by 24%.

The impressive part is Fintech and Business Services, the 2019 revenue is up to 100 billion RMB, and growing by 39% comparing with last year. 

During 2019, Tencent strengthened leadership in mobile payment services through deepening penetration among offline merchants. In the fourth quarter of 2019, there is exceeded 1 billion daily average transactions for commercial payments, covered over 800 million monthly active users, and worked with over 50 million monthly active merchants. Tencent launched Weixin 7 Pay Scores which enhanced users’ purchase propensity and loyalty to merchants through features such as waiving creditworthy users their deposits on some rental use cases. Tencent wealth management platform, LiCaiTong, increased its aggregate customer assets over 50% year-on-year, while its number of customers more than doubled year-on-year as we expanded into the mass market. Tencent affiliate WeBank rapidly grew the loan balances of its micro-loan product, WeiLiDai, within Weixin, while maintaining a healthy non-performing loan ratio.

Tencent cloud services revenues exceeded RMB17 billion in 2019, as consistently outgrew the market. The number of paying customers exceeded 1 million, benefitting from enhanced sales team and deeper partnerships with system integrators.

Tencent plays as an inevitable internet infrastructure in people daily life, especially during the 2020’s COVID-19 pandemic.

2020’s COVID-19 pandemic highlights the utility of remote working and remote health care services, and Tencent are seeking to play part in helping people cope with the new challenge. Tencent Meeting exceeded 10 million DAUs within two months since its launch in late December 2019, by far the most-used dedicated video conferencing app in China.

Tencent deepened the integration between Weixin and WeChat Work to facilitate customer management and sales conversion, and millions of enterprises used WeChat Work to resume work in the wake of the coronavirus outbreak.

Over 300 million Weixin users have utilized Tencent Health as an important access to real-time pandemic data, online consultation and AI-powered self-diagnosis services. Tencent provided our medical AI imaging capabilities to assist diagnosis of coronavirus disease. Tencent also offered reliable and professional medical information through Tencent Medipedia, and distributed pandemic-related content via multiple high-traffic platforms, such as Weixin and Tencent News, attracting over 600 million page views. Tencent Health Code becomes the most used ePass for verifying health and travel history during the outbreak. 900 million users across more than 300 cities and counties have used our Health Code since it was available in this February, with a total of 8 billion visits.

Tencent believe that value for users and tech for good. During 2020’s COVID-19 pandemic, Tencent contribute in different services, and make its product penetrated into everyone’s life.

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