Tencent warns of ‘difficult’ macro environment in spite of better performing quarter

To manage the situation, Tencent would seek to maintain a ‘healthy although not super rapid rate’ of growth by adjusting the rate of its own advertising inventory growth and help advertisers better target users.

Chinese gaming company's group’s chief strategy officer James Mitchell Tencent thinks the macro environment will remain difficult for the rest of the year, he said in an earnings call on Wednesday.

The unoptimistic view is in spite of the better-than-expected 35% jump in quarterly profit for the second quarter. Tencent reported a 24.14 billion yuan (S$4.7 billion) net profit for the three months of April to June this year, above the estimates of 20.74 billion yuan in a Reuters poll.

Tencent’s chief strategy officer James Mitchell said in an earnings call in a Reuters report: ‘Our assumption is that the macro environment will remain difficult for the rest of the year and that the situation of the heavy supply of advertising inventory will continue for the rest of the year and potentially into next year.’

Mitchell said Tencent would seek to maintain a ‘healthy although not super rapid rate’ of growth by adjusting the rate of its own advertising inventory growth. It will also attempt to help advertisers better target users.

The group’s smartphone gaming revenue bumped up 26% to 22.2 billion yuan, helped by popular gaming titles such as “Honour of Kings” and “Perfect World Mobile”.

The firm had launched 10 new smartphone games in the second quarter, compared with only the launch of one game in the first quarter.

Tencent’s desktop games revenue meanwhile, slipped 9%, to 11.7 billion yuan.

The group met with its slowest annual profit growth in 13 years last year due to a regulatory clampdown on new games by the Chinese government to curb gaming addiction.

The regulatory hurdle last year also caused the firm’s shares to plunge over 20% in market value. Compared with the trading price of HK$433.20 on January 5, 2018 to the trading price of HK$310 on December 28, 2018, the group’s shares have fallen by 28.4%.

But the resumption of approvals in December last year returned the fortunes for the mobile gaming giant.

As of Thursday’s (August 15, 2019) share price of HK$330, the group’s shares have risen by 7.6% year-to-date, from HK$306.60 on January 2, 2019.

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