Moody's maintains TENCENT's "A1" rating with a stable outlook.

Moody's announced that it will maintain the "A1" issuer rating and senior unsecured debt rating for TENCENT (00700.HK), as well as the "(P) A1" rating for its senior unsecured medium-term note program. The rating outlook remains stable. According to Cai Hui, Senior Vice President and Manager at Moody's, the rating affirmation reflects TENCENT's ability to maintain stable operations and financial performance amidst the impact of the pandemic and regulatory challenges, as well as its strong financial position. Moody's also recognizes TENCENT's business flexibility, demonstrated by its ability to diversify revenue sources and implement proactive cost optimization measures in a challenging operating environment. Cai Hui pointed out that the rating affirmation also takes into account TENCENT's balanced strategy of investing to meet growth needs without compromising its solid cash position, while fulfilling shareholder return requirements. Moody's believes that the available cash will continue to provide credit cushion. Moody's expects TENCENT's EBITDA margin to improve from around 28% in 2022 to approximately 30% in the next 12 to 18 months, benefiting from the monetization of its high-margin video content business. During the same period, Moody's forecasts that TENCENT's total EBITDA will remain stable at RMB 170 billion to RMB 190 billion. With moderate growth in revenue and profitability, and relatively stable total debt, Moody's predicts that TENCENT's leverage, as measured by adjusted debt/EBITDA, will decrease from 2.3 times as of December 31, 2022, to below 2 times in the next 12 to 18 months. (gc/a)