Deutsche Bank publishes research report today

Deutsche Bank today released its research report, reiterating its rating of "buy" on Tencent (0700.HK) shares, and raising its target price from HK $570 to 671 Hong Kong dollars.

The following is a summary of the contents of the report:

Multi-level micro-credit service will promote Tencent's success in the mobile Internet sector; reaffirm the "buy" rating

-Micro-letter provides Tencent with the best opportunity to capture China Mobile's Internet market:

Some Tencent fans argue that Facebook's acquisition of the leading mobile instant-messaging application WhatsApp deal at $19 billion is a challenge for the international development Plan for micro-credit. In our view, the Facebook move proves:

1 The top companies in the Internet believe that mobile instant messaging applications have strategic value, this application is not only the flow of "gatekeeper", but also a new commercial platform;

2 In contrast to other similar services, micro-credit has a better prospect because it has a mobile internet ecosystem that is far more dynamic than other products;

3 Micro-Trust has established a formidable competitive advantage through its cohesive social community.

We reiterate that Tencent has a superior long-term value proposition, and reiterates its "buy" rating, while raising its target price from HK $570 to 18% to 671 Hong Kong dollars.

-Set new valuations for micro-letters:

Our valuation of micro-letters is $38 billion trillion, or $124 per mau (monthly active user), which accounts for 23% of the total value of Tencent. We set this valuation on the basis of a micro-credit global competitor based on: 1 user traffic (monthly active users) and 2 commercialization potential.

We believe that it is reasonable for micro-credit valuations to be higher than those of Asian rivals, because micro-letters are "demand generators", with diversified commercial opportunities (not just from gaming opportunities), but also with the ability of micro-letters to evolve and the scope of their user activities to grow. At the same time, we believe that the micro-credit valuation is lower than the U.S. competitors because it is still in the early stages of commercialization, which from its lower revenue and Mau ratio can be seen.

-Take the lead in the vibrant mobile internet market:

There are many recent commercial opportunities in the global mobile internet market, such as advertising and gaming. We believe that the micro-letter is for China Mobile E-commerce and O2O (offline) market development to build a level of far-rich core. We believe that micro-letters are pioneers and early winners in this field, around their basic instant messaging capabilities, through the integration of 1 social networking sites, 2 entertainment, 3 shopping, 4 and other services to provide users with a seamless experience.

-a target price of HK $671 based on the classification plus total valuation; reaffirm "buy" rating; Risk:

We are expected to raise 4% and 6% per cent of Tencent revenue for fiscal year 2014 and 2015 respectively, but at the same time cut 2% and 12% for each share of earnings (not in accordance with US GAAP), as Tencent's portfolio is accelerating towards products with lower margins but higher growth rates.

We have reached a new target price of HK $671 based on the classification plus total valuation method, the basis is: 1 based on the online gaming business in the 2014 fiscal year expected earnings per share of 15 times times earnings, plus value-added services (165 Hong Kong, accounting for the ratio of 25%), 2 mobile games 1.1 times times the market surplus rate of increase (186 Hong Kong dollars, accounted for 28%), 3 of the advertising business 1.2 times times the growth rate of the market (100 Hong Kong dollars, accounting for the ratio of 15%), 4 based on E-commerce business in the fiscal year 2014 expected earnings per share earnings of 17 times multiples (191 Hong Kong, accounting for the ratio of 28%).

Main risk: Game revenues are falling faster;