Key Takeaways:
- Tencent repurchased HK$501 million in shares on May 26
- The buyback extends a program that retired HK$7.6 billion in Q1
- Stock trades at 13.5x forward earnings, below analyst targets
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Tencent buys back HK$501 million in shares as buyback campaign continues
Tencent Holdings repurchased HK$501 million of its stock on May 26, extending a buyback program that retired HK$7.6 billion in shares during the first quarter.
The repurchase comes as Tencent's stock trades at about 13.5 times forward earnings, a discount to global platform peers such as Alibaba and US tech companies, according to Yahoo Finance consensus data. The stock closed at HK$456.40 on May 15, well below the 10-year high of HK$663.00 and the 1-year analyst target estimate of about HK$709.93.
The HK$501 million buyback follows a first-quarter campaign in which Tencent bought back 12.7 million shares for HK$7.6 billion. The company reported first-quarter revenue of RMB196.5 billion, up 9% year over year, and non-IFRS net profit of RMB67.9 billion, up 11%. Marketing Services revenue rose 20% and Business Services revenue rose 20%, while gaming revenue remained resilient with domestic games up 6% and international games up 13%.
Tencent's buyback program reduces outstanding shares, boosting earnings per share for remaining holders. The company's forward price-to-earnings multiple of about 13.5x compares with higher multiples for US platform peers, reflecting the persistent China discount investors apply to the stock. The buyback also comes as Tencent increases capital spending on AI, with first-quarter capex of RMB31.9 billion, up 16% year over year. The company's annual report showed FY2025 revenue of RMB751.8 billion and non-IFRS profit attributable to shareholders of RMB259.6 billion.
The repurchase suggests management views the stock as undervalued relative to its cash-generation capacity. Tencent's capital return program, combined with its AI investment plans, allows the company to reward shareholders while funding growth. The buyback also comes as US-China trade relations showed signs of improvement after the May 14-15 Beijing summit, which established a framework for the US-China Board of Trade and included Chinese commitments to purchase at least $17 billion in US agricultural products annually through 2028. Investors will watch the August earnings release for an update on the buyback authorization and any changes to the repurchase pace.
This article is for informational purposes only and does not constitute investment advice.
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