Morgan Stanley: Maintains "overweight" rating on Tencent (00700), target price of HKD 430.
Daiwa believes that Tencent, among the leading internet companies in mainland China, used to have a valuation premium due to strong revenue growth and transparent profitability.
Morgan Stanley released a research report stating that Tencent (00700) is expected to sustain its natural growth in profit margins, with steady growth in its video account advertising business. The report also suggests that there is potential for improved shareholder returns. Morgan Stanley maintains a "Buy" rating with a target price of HKD 430 and replaces Alibaba (BABA.US) as the bank's preferred stock.
The bank believes that Tencent has historically had a valuation premium in the mainland internet sector due to strong revenue growth and transparent profitability. The recent accelerated share buybacks have also supported the stock's performance. Positive factors driving profit growth include globalizing the gaming business, monetizing social network advertising, providing more financial technology products, and strategic enhancements in consumer and industrial internet.
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