According to a report in The Financial Times (FT), China’s Tencent Holdings Ltd and Alibaba Group have both received a significant boost through their investments. The FT writes that the companies’ latest financial reports show that c. one-third of 3Q18 pretax income was investment income. Tencent, recorded revenue of CNY80.6bn (c. $11.72bn) in 3Q18, a 24% YoY increase and indicated in its financial report that the profit attributable to its equity holders for the quarter rose by 30% YoY to CNY23.33bn. This was mainly due to higher net other gains generated from investment-related items vs the same period last year. The firm’s total investment assets reached CNY366.4bn by end 3Q18, accounting for 54% of its total assets, while the value of these assets stood at less than CNY5.3bn by the end of 2010 or less than 15% of the company’s total assets. For Tencent, the FT notes that the proportion of profits from investments rose from 7% in 2016 to 22% in 2017, while the share increased from 14% in 2017 to 30% by March 2018 for Alibaba. The report highlights that in 3Q18 as Tencent’s online game revenues decreased 4% YoY to CNY25.81bn, investment gains in particular fueled company earnings.
Meanwhile, Alibaba’s investment disposals contributed CNY4.5bn to its interest and net income of CNY6.6bn in 3Q18, with most coming from selling a residual holding in Meituan Dianping, a provider of on-demand online services backed by Tencent.
The report also cites information from an unnamed source as saying that the number of companies listed on Tencent’s portfolio approaches 750, while it is around 350 for Alibaba.
The two companies reportedly also have different investment strategies – Alibaba prefers majority control or full ownership, focusing more on its core strategy of new retail and key areas of services, logistics and international expansion, while Tencent “favours minority stakes in companies that it can feed traffic to from WeChat and that can make up its absence in the e-commerce and retail businesses.”