Tech,  Wealth

Tencent Doubles Down: Massive Share Buyback Signals Confidence and Growth

On 20 March, Tencent released its 2023 full-year earnings report. In the earnings report, Tencent disclosed an important piece of information that Tencent plans to at least double the size of its share buybacks in 2024, from HK$49 billion in 2023 to over HK$100 billion.

This is undoubtedly heavy news for the secondary market, bearing in mind that Tencent’s net profit (Non-IFRS) in 2023 was about 157.7 billion yuan (about HK$171.4 billion). As of the Hong Kong stock market close on 20 March, Tencent’s share price was HK$288.8 per share, with a total market value of about HK$272 billion. According to the current market value, the shares Tencent plans to buy back this year will account for about 3.7% of the total market value.

For the share repurchase plan, Tencent President Liu Kiping also said in the earnings call that increasing the repurchase is the most beneficial programme for shareholders, especially when the share price is undervalued, when Tencent has the ability to continue to give back to shareholders.

From 2023 to the present, Tencent’s share price overall is in decline, 27 January 2023, Tencent’s share price reached 414.2 Hong Kong dollars, which is the highest point in the past two years, the subsequent year, Tencent’s share price fluctuation down, 2 January this year, Tencent’s share price fell to 260.2 Hong Kong dollars, for the lowest point of the past 52 weeks, compared with the beginning of the high point of 2023, a drop of more than 37%.

Tencent is now choosing to increase the scale of share buybacks, but also to the outside world to release confidence from the company. And for Tencent, it has the maturity to buy back both in terms of business development status and capital reserves.

On the one hand, as of the end of 2023, Tencent has cash and cash equivalents, time deposits and other total amount of about 403.3 billion yuan, which means that the repurchase of shares Tencent has sufficient cash. On the other hand, Tencent’s performance has been improving in recent years. As of Q4 2023, Tencent’s operating revenue has increased year-on-year for five consecutive quarters, while its net profit (Non-IFRS) has increased year-on-year for six consecutive quarters, and the growth rate of the net profit has been increasing.

This also shows that Tencent has sailed back to the fast lane of growth after experiencing a 2022 performance trough. In the earnings call, Tencent’s management was also optimistic about 2024.

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