Chinese online giant Tencent posts 61% rise in net profit

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Powered by mobile games, Tencent's online games division raked in 28.8 billion yuan in revenue in the first quarter, posting a 26 percent year-on-year gain.

Shares in the second most valuable Asian public company has come under heavy pressure leading up to the earnings report, as investors feared the potential for lower margins along with higher costs. The Chinese tech giant's impressive financials were largely supported by its WeChat social media platform. Revenues were up 48 percent year-on-year. Profit was up 61% over the same period one year ago.

Tencent reported first-quarter earnings that topped analyst estimates, but investors are concerned about rising spending which could weigh on margins.

Its gaming business drove revenues at Tencent during the quarter.

Smartphone games revenue, the largest revenue contributor, jumped 68 per cent to 21.7bn yuan while revenue from the more lucrative category of PC games was flat at 14.1bn yuan. The company announced that had seen growth in the double digits related to the number of daily active users for that game.

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WeChat is China's largest messaging service, through which a variety of businesses including gaming, advertising and social networking have flourished in recent years. It's also secured Chinese distribution rights to some of the world's hottest games, including PlayerUnknown's Battlegrounds, adapting it into mobile titles to draw in smartphone users. Another title - Honour of Kings - was the world's highest-grossing mobile game previous year thanks to its China-based users and Tencent has been pushing it to worldwide audiences.

"Mobile game growth was very strong, as the first quarter is usually a good season when users spend more time on their devices during the holidays", said Benjamin Wu, a Shanghai-based analyst with Pacific Epoch. It's a tournament-style game that is popular in e-sports, which is competitive video gaming. Epic Games developed Fortnite.

Fortnite, though unavailable in China yet, has gone viral in USA and Europe and ranked as the top-grossing game globally in March, according to Superdata. It is available as well on mobile. Now unavailable in China, it will be launched in the country within the next few months.

Tencent finished the day 3.74 per cent higher at HK$411 after surging as much as 7.07 per cent in its biggest daily rise since August 2015.

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