On Friday, Tencent (HKG:0700) saw a 4.12% rise in share price, seemingly directly linked towards Chinese regulators’ approval of two new mobile games of the company. Tencent also suffered from laws in China that limit the hours that people under the age of 18 can play on video games per day.
The games market for China is, at the moment, a notoriously difficult market as regulators were refusing to approve any games since March of last year, as well as the aforementioned game-time laws put in place in June. At their peak, Tencent had a share price of HK$474.60 at the close of January 23rd, 2018, before plummeting to HK$252.20 on the 30th of October, 2018. Since then, the company has seen shares fluctuate, but moving upwards over time.
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Games Approvals for Tencent
This rise actually comes after a recent scare for Tencent. Regulators started approving new titles for the market at the start of the month. The first three lists were absent of any title developed or published by Tencent, scaring investors. Understandably so, as even during strict limitations, the mobile games division showed a 7% year on year increase during their recent Q3 results.
While this is, understandably, a boost for the company and investors, the elation may be premature. The two titles that have been approved are both educational games, named Wood Joints and Folding Fan respectively. These are unlikely to be titles that Tencent will monetise, limited the effects that these titles could actually have.
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Both titles were also announced just prior to the moratorium on approving new games in an attempt to improve the company’s image, as the government, particularly Xe Jinping, who were focused on purported ill effects from the constant playing of mobile games, with a primary concern being Myopia (nearsightedness).
PlayerUnknown’s Battlegrounds Mobile – The Major Title They Need
The real thought for Tencent is when PlayUnknown’s Battlegrounds (PUBG) Mobile will finally be approved. Tencent does currently have PUBG Mobile released in China, but until it’s completely approved by the regulators there are no options for in-game monetisation. Considering the sheer popularity of the title in China, that is the game that could really push forward revenues for the company and the one that investors are plainly hoping for.
Investors are, no doubt, seeing a huge positive in the approval and release of new titles. Undoubtedly they are truly hoping for a blockbuster the size of PUBG Mobile to be next on the list. Once that day comes, the companies mobile division will truly see a boost in revenue, likely far and above the increases seen in recent quarterly results. Until that date, revenues may grow, but they will be sluggish and below potential.
