Even as the rest of the Hong Kong market was hit by the US-China trade dispute, Tencent’s share price surged on Wednesday on the launch of its “Game for Peace”, or “Heping Jingying”, a military game with an anti-terrorist theme.
Tencent grew to HK$395 (US$50.33), up 3.7%, on Wednesday morning. The shares closed 1.1% up at HK$384.8 while the Hang Seng Index fell 359 points, or 1.23%, to 29,003.2.
Late on Tuesday, Shenzhen-based Tencent shut down its popular mobile app PlayerUnknown’s Battlegrounds (PUBG) and launched the public beta testing of the Game for Peace, according to an online statement.
Players from PlayerUnknown’s Battlegrounds can migrate their accounts and equipment to Game for Peace. Tencent said the new game gained approval from the State Administration of Press and Publication (SAPP) on April 10.
In November 2017, Tencent won a license from Bluehole, Inc, a South Korean video game developer, to launch PlayerUnknown’s Battlegrounds in China. Players can engage in shoot-outs on an island, while those who win a match are greeted with the phrase “winner winner chicken dinner.” In Hong Kong, youngsters call the game “Eat chickens”.
However, Tencent has failed to get a commercial license from the Chinese government amid geopolitical disputes on the Korean Peninsula. This meant Tencent was unable to generate revenue from the game by selling virtual weapons and tools.
Also, the average number of players online has been gradually declining from 1.5 million in January 2018 to 400,000 last November.
Before Tencent could get a commercial license, the company developed a similar Game for Peace and promoted it as a “military skills competition game”. The new game also pays a “tribute to warriors who defend the territorial air space of China.” Its loading screen also showed a recruitment notice for China’s air force.
Liao Xuhua, an analyst with Analysys, told Technode.com that it is necessary for Tencent to replace PUBG Mobile with Game for Peace as it is unlikely that the former will get a commercial license.
According to a research report of Daiwa Securities, there will be some loss in the number of players during the transition from PUBG Mobile to Game for Peace, but the latter can provide Tencent with revenue. Daiwa maintained an “outperform” rating for Tencent with a 12-month target price of HK$435, which is about 33 times the earnings-per-share for the 2019-2020 financial year.
Assuming that the number of active users of Game for Peace is about 50 million to 60 million, the game can generate an annual revenue of 8 billion to 10 billion yuan (US$1.18 billion to $1.47 billion), according to a research report by China Renaissance, which maintained a “buy” rating and a target price of HK$420 for Tencent.
The launch of Game for Peace is positive news for Tencent but it remains too early to say whether the new game will become a strong revenue stream, said Wong Wai-ho, an analyst at China Merchants Securities (Hong Kong).