Tencent's share price rises 4% as it seeks to sell international bonds

The Chinese tech company has applied to the Hong Kong stock exchange to issue international notes as part of a US$20 billion note programme.

Chinese technology giant Tencent Holdings has applied to The Stock Exchange of Hong Kong to conduct an international offering of bonds as part of a global medium term note programme.

Tencent says it intends to list the notes on the Hong Kong bourse within a period of 12 months from 25 May 2020 – the announcement date, by way of debt issues to professional investors.

The company added that the notes will be issued in series with different issue dates and terms and may be denominated in any currency subject to compliance with all relevant laws, regulations and directives.

As at the date of the announcement, the company has US$12 billion notes outstanding under the programme capped at US$20 billion.

The completion of the ‘Proposed Notes Issue’ is dependent on several factors, including but not limited to global market conditions, corporate needs of the company and investors’ interests.

The Company has appointed BofA Securities and Deutsche Bank as the arrangers under the Programme. BofA Securities, HSBC, Morgan Stanley and Goldman Sachs are the joint global coordinators in respect of the Proposed Notes Issue.

On Tuesday 26 May 2020, Japanese game developer Marvelous Inc also revealed that Tencent would be acquiring a 20% stake worth US$65 billion in the company.

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Tencent share price: what's the latest since Q1 update?

Since the circular was posted and the Marvelous deal was publicised, Tencent’s share price has risen over 4%. As at 14:30 on Tuesday 26 May 2020, the group’s stocks are trading at HK$427.60 apiece.

These latest updates follow the Chinese internet company’s first quarter financial report for 2020, in which it posted higher year-on-year revenue, net profit and diluted unadjusted earnings per share of 26%, 6% and 5% respectively.

Despite weaker domestic economic conditions caused by the Covid-19 pandemic, the company was able to record a 31% jump in online games revenue, a 32% increase in online advertising sales, as well as 27% revenue growth in value added services.

On the other hand, media advertising revenues decreased by 10% to 3.21 billion Chinese yuan, primarily due to lower revenues from video and news platforms as a result of weak macro-economic conditions and the suspension of sports events.

Read also: Alibaba shares tumble in pre-market trading as earnings fall 89%

IG analyst: Tencent shares to hit HK$500 in the near-term

IG analyst Reo Liao pointed out that another segment that felt the effects of Covid-19 in this latest reporting quarter was online payments, or FinTech, which increased by a slower 22% in revenue year-on-year. All things considered; he said that growth for this segment – alongside online games – remains ‘very strong’.

Furthermore, the company also recorded a combined monthly active user total of 1.2 billion for its WeChat and Weixin apps – an 8.2% year-on-year increase, while total paid users skyrocketed 19.3% to 197.4 million.

Looking ahead, Liao said that as life normalises again and going-out restrictions are lifted, the online payments and computer games sectors should see a rebound in the second quarter of 2020. He also noted that any small conversions of free users to paid users will also lead to a huge jump in Tencent’s revenue.

On that note, he said that the Tencent stock – a fundamentally sound and largely fundamentals-based stock – should hit HK$500 a share within the next few months, bar a market dip similar to the one that took place in March this year.

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