Tencent profit soars 43%, driven by online services

Tencent's penguin mascot toys are seen at the company's office in Xigema building in Beijing, Dec 23, 2016. [Photo/VCG]

Chinese internet services provider Tencent Holdings Ltd posted a hefty increase in net profits for 2016, citing its strategy to connect its online services as the main success driver.

The company behind the WeChat instant-messaging app said the profit attributable to its equity holders for the year ended Dec 31 surged 43 percent to 41 billion yuan ($5.95 billion), from 28.8 billion yuan a year earlier. Revenues swelled 48 percent to 151.93 billion yuan from the previous year's 102.86 billion yuan.

The company attributed the growth to smartphone games, social and performance advertising, digital content sales and emerging businesses such as payment-related services.

Tencent recommended paying a dividend of HK$0.61 per share (8 cents) for the period, a nearly 30 percent increase from the previous year.

The company stated it had strengthened its connection strategy last year to make its social platforms more interactive for users, and to connect its social platforms to a broader range of online and offline services. WeChat remained China's most-used app in 2016, with QQ－another Tencent platform－taking second place, the China Internet Network Information Center said in January.

Tencent's social media dominance means that its bottom line depends on selling in-game items to the country's internet population and advertising to those users. As larger brands tighten their advertising budgets, smaller advertisers on WeChat drove the growth in Tencent's performance-based advertising business last year.

The company also developed its mini program feature for WeChat, which offers users apps within the instant-messaging platform itself. The initiative was launched earlier this year and hosts stripped-down versions of popular apps, letting users order and pay for services without ever leaving WeChat.

"For this year, we intend to further our connection strategy by extending our ecosystem around our core social and communication platforms through adding more services and smartphone games, expanding our advertising market share, growing digital content subscriber bases, enhancing payment related services and developing emerging technology such as machine learning and cloud services," Tencent Chairman Pony Ma said in the statement filed to the Hong Kong Stock Exchange on Wednesday.

The internet services provider also said it proposes to list Yue Wen Group－its online bookstore with 10 million e-books and 600 million registered readers－in Hong Kong. Fundraising is expected to fetch between $600 million and $800 million.

"We are considering Hong Kong as a likely listing venue," Tencent's President and Executive Director Martin Lau said at a news conference in Hong Kong on Wednesday.

Tencent's share prices in Hong Kong fell 1.57 percent to close at HK$225.2 on Wednesday.

Bloomberg contributed to this story.