Equity Valuation & Analysis Report - Tencent Holdings Limited

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Equity Valuation & Analysis Report

ACCT6111E Business Valuation & Analysis
Instructor: Professor Albert Tsang

Team members
Name Student ID
Winnie Yam 1155025593
Sherry Zhang 1155023131
Fiona Tong 1093644801
Tommy Wu 1155021510
Robert Pun 1155026071

21 November 2013

TABLE OF CONTENTS

1.0 Executive summary [3]

2.0 Industry overview [4]

3.0 Company overview [6]

4.0 Financial statement analysis [12]

5.0 Profitability analysis [23]

6.0 Company valuation [27]

7.0 Concerns beyond financials [32]

8.0 Recommendations [35]

Bibliography [36]

List of Exhibits [37]
List of Appendix [48]

1.0 Executive summary
Tencent is a Chinese internet conglomerate engaging in internet valued added services (IVAS), mobile valued added services (MVAS) and online advertising and e-commerce. The internet services industry in China is at the growing stage due to technological advances leading to higher internet and mobile penetration within the country at a lower cost, as well as the strong economic growth upon China’s admission to the World Trade Organization (WTO).

Tencent’s most famous products include QQ (instant messenger), Qzone (social networking service) and QQ.com (internet portal) and 3G.QQ.COM (WAP portal) in which Tencent enjoys a leading position in the China market. The key success factors of Tencent are its large user base and strong R&D capability, which enable Tencent to offer a highly diversified product portfolio that locks-in existing users and engages potential ones. However, the increasing competitive pressure on a domestic and global scale, possible incapability to keep up with technological advances and breaking up with mobile telecommunication services providers provide additional business risks to Tencent.

This study intends to provide a comprehensive analysis on the



Bibliography: List of exhibits Exhibit 2.0.1 Overall internet users and penetration rate, 2005-2012 Exhibit 2.0.2 GDP Growth in China and the U.S., 2000Q1-2012Q4

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