UOB Kay Hian lowered its target price for Tencent Holdings (00700) to HK$423 from HK$437 and maintained its "buy" rating.
The research house said Tencent reported mixed 2Q results. Revenue grew 21%, missing consensus by 5%. Non-GAAP net income increased 19%, 3% ahead of consensus. Gross margin shrank 2.7ppt to 44.1% due to higher contribution from FinTech and cloud business, and is in line with consensus estimates of 44.6%.
UOBKH cut its revenue forecast for 2019/20 by 4%/4% to reflect the weaker-than-expected 2Q19 revenue growth. However, it maintained its EPS estimates largely unchanged, due to the improving margins.
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