![]() We see the value of listed investments excluding subsidiaries is well beneath the 2Q21 apotheosis of RMB 1,446 billion: I believe management spent nearly 43% of FCF on buybacks because they thought the stock was a good value. These developments make me more comfortable with the valuation range of investments along with the valuation range for the efficacy of deploying capital.ģQ22 FCF was RMB 27.6 billion and Tencent spent RMB 11.8 billion buying back stock in the period. ![]() Management has also provided more clarity on the JD ( JD) distribution. My July 2022 article talked about the fact that Tencent should improve communication with investors and I’m happy to see that this has partially occurred with respect to unlisted investments in the 3Q22 earnings presentation. ![]() Tesla CEO Musk has said that there should be a way to make a micropayment of 10 to 25 cents in order to read an article through Twitter and Twitter would need to mimic WeChat for this. I believe one of the reasons Tesla CEO Musk paid a premium for Twitter was because he sees tremendous potential for WeChat in China and other companies who can mimic WeChat outside of China. One of the best investments in history would come from Naspers, a South African conglomerate that took a 32 percent stake in Tencent in 2001 for around $20 million (years later, the stake would be worth over $100 billion). A well-timed venture-capital infusion in 2000 from the US-based International Data Group (IDG) and the Hong Kong–based PCCW Global saved it from running out of funds. Without this foreign help for companies in this sensitive sector, Tencent (and other companies) would not have survived the dotcom crash. It tacitly allowed work-arounds that enabled Chinese tech firms like Tencent to accept foreign money through holding companies located offshore. The Chinese government was not willing to open sensitive technology sectors fully to foreigners, but it also pragmatically knew that it needed foreign capital to develop a homegrown tech sector. Tech companies popped up in China quickly, but local venture capital was scarce to nonexistent, and Chinese stock markets set the bar for listings too high for new companies like Tencent. ![]() It’s difficult for the powers that be in Beijing to own up to the fact that the tech titans of China depended on foreign investment, especially by US-based venture capital and stock markets, to survive their early years. The Cashless Revolution book by Martin Chorzempa makes the point that foreign capital has been very helpful to China’s economy in general and their homegrown tech sector in particular: General Valuation Thoughtsĭelisting is a serious risk but it is in China’s best interest to continue working with the West with respect to capital markets. As such, WeChat and Alipay have opened up the economy in China with concepts like micro-tipping where independent publishers can be compensated at the individual article level rather than the restrictive all-or-nothing subscription model. This is especially important for small purchases like coffee and parking where the flat fee in the West of 20 to 30 cents can eat up a large part of the transaction. WeChat and Alipay don’t charge merchants much relative to card-based transactions in the West. It’s easy for small merchants to use QR codes such that WeChat and Alipay are accepted everywhere. Per the Cashless Revolution book, QR codes for payments mean there is no need to coordinate with phone manufacturers or telecom companies. WeChat allows people in China to pay for rides without leaving the app. I think if we achieve that or come even close to that with Twitter, that would be a success. You basically live on WeChat in China because it's so helpful, so useful to daily life. Per Business Insider, Tesla ( TSLA) CEO Elon Musk said there is no equivalent of Tencent’s WeChat outside of China and he wants Twitter to be more like WeChat: This is not the case in China where WeChat and Alipay ( BABA ) keep payment fees low on a relative basis regardless of the size of the transactionĪt the time of this writing, 1 RMB is about $0.15. In the West, small transactions via credit cards are painful for merchants because a large percentage of the transaction does not go towards the merchant. Today the WeChat super-app is more like a smartphone operating system than a regular app. Starting in January 2017, Tencent launched mini-programs which are similar to the regular apps we see on Apple and Google smartphones. My thesis is that there is nothing like Tencent’s ( OTCPK:TCEHY) WeChat outside of China.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |