Tencent's Pace Of Stock Buyback Boost Could Match Alibaba, Analysts Say

Tencent Holding Ltd TCEHY boosted share repurchases to spend over $3 billion in 2022 as the company's stock price plunged to four-year lows. 

The Shenzhen-based company has focused on returning cash to shareholders with its outlook dented by China's sagging economy and President Xi Jinping's crackdown on gaming, the Financial Times reported.

Tencent increased its buyback outlay to HK$600 million ($76 million) last week, which could hit HK$90 billion next year, on par with the buyback program at rival Alibaba Group Holding Limited BABA, Bernstein analysts estimate.

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Beijing's antitrust scrutiny of its aggressive domestic dealmaking has slowed its huge investment outlays, which had previously consumed extra capital. 

Tencent made 46 investments in Chinese groups in the first nine months of the year, down from 199 over the same period in the prior year, ITjuzi finds. 

With its portfolio of public and private holdings worth roughly $140 billion, Tencent has also explored sales of up to Rmb100 billion ($13.8 billion) of its holdings in the coming months, which could be funneled into the buybacks or distributed as special dividends to shareholders. 

Tencent shares have lost more than 67% of their value since February 2021, hitting lows not seen since 2018. In May, Tencent authorized a program to buy back 10% of its outstanding shares over the following 12 months.

Robin Zhu of Bernstein noted that the "buybacks suggest management is more optimistic than the market." Bernstein estimated that Tencent could return 5-6% of its market capitalization to shareholders next year through a combination of dividends, buybacks, and distributions.

But Zhu said, "gaming is still the key" for Tencent, adding that investors were worried Beijing's harsh restrictions on youth gaming and the tepid pace of game approvals could cause the group's most profitable business line to continue shrinking next year. 

Around September, Tencent shareholders added $7.6 billion in shares to Hong Kong's clearing and settlement system, spurring speculation that its biggest shareholder, Naspers Ltd NAPRF, offloaded part of its stake.

Tencent reported its first decline in quarterly revenues for the June quarter after advertising revenue shrank 18%.