PCFM sees continuing dividends in Tencent Investment
If there has been a recent common theme among Australia’s better-performing fund managers, it has been their ability to identify the winning bets being taken by established companies which might otherwise be regarded as fully-priced.
While some fund managers have been attracted to US food and beverage chains expanding into China, others have seen value in backing the continued growth trajectories of established technology giants such as Microsoft and Apple.
China’s Tencent, already an established technology giant, is proving still attractive to Australia’s Premium China Funds Management (PCFM) for other reasons, not least Premium China’s ongoing on-the-ground analysis of developments in China.
PCFM executive director, Jonathan Wu said that while many fund managers had rightly recognised the potential of Tencent and had priced their allocations accordingly, PCFM believed Tencent’s willingness to cross boundaries made it a continued growth investment.
Wu said his firm was particularly interested in the manner in which Tencent had pushed into the Chinese public health sector with an application which could arguably be adapted to meet the needs of other public health systems.
He pointed to “Tencent Health” which has been undergoing testing on messaging app WeChat since mid-March making e-health services available to users including online consultations and medication delivery as well as online appointments for offline hospitals.
Wu said that the launch of “Tencent Health” was not just important because of its commercial potential for the company but, from an investor’s point of view, because it signalled Tencent’s increasing focus on what was becoming known as the “industrial internet” – to deal with industries as well as consumers.
PCFM’s view of Tencent is reflected in its allocations towards the Chinese tech company which represents one of the largest holdings in the Premium Asia Fund – 5.4% (HK listed) together with another 2.4% in Tencent music entertainment (US Listed), representing the seventh largest holding in the fund
The exposure is similar with respect to the company’s Premium China Fund – 6.0% in Tencent (HK Listed) – representing the second largest holding in the fund, and another 3.0% in Tencent Music Entertainment (US Listed) – representing the ninth largest holding in the fund.
“PCFM was one of the earliest investors in Tencent and while our allocations have varied over time, they reflect our on-the-ground analysis of what the company is doing and what that means in terms of its ongoing growth potential and return on investment,” Wu said.
“We think Tencent Health represents an important indicator of the company’s willingness to leverage its scale to broaden its product offering to meet the needs of growth sectors such as public health and education,” he said.