Tencent Holdings Limited

Summary

• Stock: Tencent Holdings Limited (HKG: 0700) common equity

• Date: May 31, 2022

• Market cap: HK$3.5trn

• Rating: Buy

• Price: HK$350

• Target: HK$434

Setting the stage

Tencent, a Chinese technology company, builds and manages online games, entertainment apps, social networks, digital payments platforms, and cloud software. The company makes money by selling in-game items, subscriptions to its apps and software, taking a percentage of the financial transactions it processes, and charging for advertising across its platforms.

The Chinese economy is expanding, and the middle class is getting richer. Digital processes are taking over from analogue methods, and the opportunity for companies to create digital tools is immense. The combined value of the digital payment, advertising and application market in China is now $209bn, almost triple its size only five years ago. The market is large and growing, and an underlying shift in how we live and work is underway, with the mobile phone taking centre sta…