Tencent's Profit Rises 37% as Sales Leap

Tencent's Profit Rises 37% as Sales Leap

Tencent Holdings Ltd., 0700.HK -4.03% China's largest listed Internet company, said its fourth-quarter net profit rose 37% amid rising revenue from online games and sales of virtual products.

The Shenzhen-based online-game and social-media company has in recent quarters buffeted a slowdown in ad spending in China with its diverse Web services such as online and mobile games. The company also has a widely watched mobile application, known as WeChat, that it has been using to attract the growing number of Chinese individuals who are connecting to the Internet via smartphones instead of computers.

Tencent said it would step up investment to market WeChat, which has attracted 300 million users since it was launched two years ago, outside of China. The company also said it would continue to spend on its e-commerce operation, media offerings and entertainment content.

Net profit for the three months ended Dec. 31 rose to 3.46 billion yuan ($556.6 million) from 2.54 billion yuan a year earlier, beating the average 3.39 billion yuan forecast of nine analysts polled earlier by Thomson Reuters.

Revenue jumped 53% to 12.15 billion yuan from 7.92 billion yuan a year earlier, driven primarily by the company's burgeoning e-commerce operations. Although Tencent hasn't yet given a timeline for when its online retail operation will become profitable, e-commerce revenue rose 49% to 1.68 billion yuan in the fourth quarter from the previous quarter.

Tencent also attributed the quick growth in e-commerce revenue to its expansion from eastern China to the southern part of the country, and added that it soon plans to expand to Beijing and northern China.

At Tencent's games business, revenue grew only 1% to 8.46 billion yuan in the fourth quarter from the third quarter. The company attributed the relatively slow growth rate to seasonality and its efforts to attract more users instead of making money from its games.

Tencent operates online games like "League of Legends" as well as instant-messaging service QQ, web portal, games portal QQ Games and social-networking site Qzone.

The company recommended a final dividend of 1 Hong Kong dollar (13 U.S. cents), up from 75 Hong Kong cents a share a year earlier.