Fitch Ratings has affirmed Tencent’s A+ issuer default rating (IDR) and senior unsecured rating with a stable outlook, expecting “steady” revenue growth for the internet giant.
The rating agency said that Tencent’s strong market position in China and its diversified revenue streams support its credit profile. Fitch also noted that Tencent has a strong track record of generating free cash flow (FCF).
However, the agency also highlighted some potential risks to Tencent’s credit profile, such as the increasing regulatory scrutiny in China and the potential for competition from other internet companies.
“Tencent’s ratings reflect its strong market position in China, diversified revenue streams, and strong track record of generating FCF. The ratings are balanced by increasing regulatory scrutiny in China and the potential for competition from other internet companies,” Fitch said in a statement.
Tencent’s revenue is expected to grow at a “steady” pace in the coming years, driven by its core gaming and social media businesses. Fitch also expects Tencent to continue to generate strong FCF, which will be used to invest in new growth opportunities and to repay debt.
“Tencent’s revenue is expected to grow at a steady pace in the coming years, driven by its core gaming and social media businesses. The company is also expected to generate strong FCF, which will be used to invest in new growth opportunities and to repay debt,” Fitch said.
The agency also noted that Tencent’s balance sheet is strong, with a net cash position of RMB21 billion (USD3.2 billion) as of June 30, 2023.
“Tencent’s balance sheet is strong, with a net cash position of RMB21 billion (USD3.2 billion) as of June 30, 2023. The company has a low leverage ratio of 0.1x and a strong liquidity position,” Fitch said.
Overall, Fitch’s affirmation of Tencent’s A+ rating is a positive sign for the company. The rating agency’s outlook is stable, which suggests that it expects Tencent’s credit profile to remain strong in the coming years.
