Loomis Sayles Global Growth Fund on Tencent Holdings Limited
Thesis
Tencent operates one of China's largest internet ecosystems across social networking, gaming, advertising, payments, cloud and other digital services. Loomis Sayles sees the company benefiting from multiple secular growth drivers, including gaming, media, advertising, payments and cloud computing, with AI increasingly improving advertising and cloud offerings. The business continues to generate substantial operating profit and free cash flow while repurchasing shares. Despite near-term regulatory and economic uncertainty in China, the team believes Tencent's long-term fundamentals remain intact and that its growth prospects are not reflected in the current share price.
“We believe Tencent is one of the best-positioned companies in the China internet services industry.”
Key risks
- Regulatory uncertainty in China
- Economic uncertainty in China
- New AI products are currently requiring elevated operating and promotional expenses