Tencent spent a whopping 112 billion on buybacks last year

Author | Huang Yu

Editor | Liu Baodan

At the beginning of last year, Tencent announced a buyback plan worth 100 billion, and in 2024, it exceeded its annual buyback target, setting a historical record.

According to Wall Street News, in 2024, Tencent's total buyback amount has reached HKD 112 billion, which is 2.3 times the buyback amount of approximately HKD 49.4 billion in 2023, with a total of 307 million shares repurchased at an average buyback price of approximately HKD 364.5 per share.

Since major shareholder Prosus began selling Tencent shares in June 2022, as of December 27, 2024, Tencent's total buyback amount has reached HKD 187.6 billion, surpassing the share sale amount of Prosus during the same period, which was HKD 174.5 billion, completely offsetting the impact of the major shareholder's sell-off.

Looking at the entire Hong Kong stock market, Tencent's buyback scale is also unparalleled. Wind data shows that in 2024, the total buyback amount in the Hong Kong stock market reached a record HKD 265.7 billion, a year-on-year increase of 109%. Throughout the year, 281 listed companies in Hong Kong implemented buybacks, with Tencent's total buyback amount accounting for 42%, nearly supporting half of the Hong Kong stock buyback market.

In addition, due to Tencent's adoption of the "cancellation buyback" method (where shares are canceled immediately after repurchase, helping to enhance earnings per share), Tencent's total share capital continues to decrease.

Data shows that as of December 31, 2024, Tencent's total share capital was 9.22 billion shares, a decrease of 260 million shares compared to the beginning of 2024. From the end of 2021 to now, Tencent's total share capital has decreased by approximately 380 million shares over three years, reaching the lowest level in ten years, while its earnings per share have continued to rise, with growth rates exceeding those of revenue and operating profit.

According to the non-International Financial Reporting Standards net profit calculation for the third quarter of 2024, Tencent's earnings per share for the quarter reached HKD 6.475, a year-on-year increase of 36%, significantly exceeding the growth rate of operating profit during the same period.

Share buybacks are an important measure for Tencent to boost market confidence and enhance shareholder returns.

In March of last year, Tencent first disclosed its annual buyback plan in its financial report, with a buyback amount of no less than HKD 100 billion, which is equivalent to 60% of the free cash flow generated by Tencent in 2022.

In terms of execution, Tencent's buyback amounts in each quarter of 2024 were HKD 14.835 billion, HKD 37.515 billion, HKD 35.913 billion, and HKD 23.739 billion, totaling HKD 112 billion, with a total of 129 buyback actions throughout the year, averaging HKD 868 million per day.

During the capital feast from the end of September to the beginning of October, Tencent's buyback efforts did not stop.

On October 3, 4, and 7, Tencent's buyback amounts in the Hong Kong stock market were HKD 251 million, HKD 137 million, and HKD 502 million, respectively. On October 7, when the stock price broke HKD 482, reaching an annual high, Tencent's buyback amount still exceeded HKD 500 million that day, with the highest buyback price reaching HKD 482 per share.

Behind the large-scale buybacks is Tencent's belief that its stock price is undervalued Tencent President Liu Chiping has stated that historically, Tencent has consistently distributed cash dividends to shareholders and regularly repurchased shares when it believes the stock price is undervalued. Especially today, when cash flow profits have reached historic highs and continue to grow, management recommends increasing cash dividend payouts and plans to at least double the share repurchase scale in 2024.

In the era of mobile internet, Tencent is the absolute winner, firmly holding the position of "king of tech stocks" in China with its two major moat businesses: social networking and gaming. At the beginning of 2021, its stock price once approached HKD 700 per share, with a market capitalization exceeding HKD 7 trillion.

However, in the following three years, constrained by internet regulation, sluggish business growth, and major shareholder reductions, Tencent's stock price experienced significant fluctuations, with its market capitalization hovering around HKD 3 trillion. The price-to-earnings ratio fell from over 30 times to below 9 times at its lowest. The once-leading internet giant seems to be losing its imagination.

This year, Tencent's stock performance has made many investors feel "uplifted." In 2024, Tencent's stock price has cumulatively risen over 40%, and as of now, its total market capitalization has reached approximately HKD 3.85 trillion, with a price-to-earnings ratio (TTM) returning to 20 times.

This is driven not only by the hundreds of billions in repurchase plans but also by the positive impact of Tencent's own performance stabilizing and rebounding.

In the past year, Tencent has seen robust growth momentum driven by multiple "new sprout" businesses such as video accounts, mini-programs, AI large models, and SaaS. Some evergreen games have also "renewed," achieving a high-quality growth model that collectively drives profit margin growth.

Since the second half of 2022, Tencent has achieved a new growth momentum where profit growth has exceeded revenue growth for eight consecutive quarters.

According to financial report data, in the third quarter, Tencent achieved operating revenue of HKD 167.193 billion, a year-on-year increase of 8%, in line with market expectations. Non-IFRS net profit attributable to shareholders grew by 33% year-on-year to HKD 59.813 billion, setting a new historical high while exceeding market expectations.

Against this backdrop, Tencent has also gained the confidence to "buy itself." The financial report shows that in the first three quarters of this year, Tencent's quarterly free cash flow reached HKD 51.9 billion, HKD 40.4 billion, and HKD 58.5 billion, respectively. As of September 30, Tencent's cash and cash equivalents balance reached HKD 145.468 billion.

In addition, in recent years, Tencent has continuously increased its dividend distribution efforts. The 2024 interim report shows that Tencent has distributed a final dividend of HKD 3.40 per share (approximately HKD 31.7 billion) for the year ending December 31, 2023, a year-on-year increase of about 39%.

HuaXi Securities analyst Zhao Lin believes that the high dividend and repurchase plan demonstrate Tencent's long-term confidence in its stock price.

After several years of transformation, Tencent has already passed through the trough, the major shareholder's reduction has also entered its final stage, the selling pressure on the stock price has weakened, and the horn for a new journey has been sounded