Matthew Canterman joins this director of research yet Ball Metaverse Research Partners to take a closer look at ten Cent. Boy, this is a complex picture here. On these shares traded a little higher in the U s A d r s up three percent, Matthew, and that's after the process shares. The nasper's assets of ten Cent treated flat in Europe. So it's a little confusing. I guess. On the positive side, investors seem to like the cost cutting and the management discipline.
I think, so it's the cost cutting is really impressive. You know, they slashed about five thousand jobs quarter over quarter, which is a lot of people, but you know, it really makes a difference. And I also think there's some green shoots and some of the new businesses like advertising. You know, ten Cent kind of has a clone of a TikTok do in it's their short video program. It's really getting a lot of engagement. But they only just started monetizing it in July, and the initial trends that
they discussed are really really encouraging. You know, they expect that to reach over a billion R and B i F quarterly revenue, you know, within a couple of quarters. Now, so it's really going to start ramping up. And although the macro environment for advertising and fintech and everything that's
kind of macro sensitive is not great. We saw the July retail numbers in China not great, having these new businesses that are organically growing from basically zero can really help them re accelerate the top line a lot sooner than maybe some people thought. Alright, so you saying advertising will come back, you'll focus very much on the beta verse. So now, Matthew, and how does that fit into ten cents future growth? Absolutely? I mean, you know, ten Cent
is the global leader and interactive entertainment. And as we think about the metaverse at Fall Metaverse Research Partners and you know, ten Cents a member of our fall Fall Metaverse Index. You know, we think about it as the evolution of the Internet to encompass all things real time three D and so as a leader in developing real time three D experiences, ten Cent will be at the forefront of the development of the metaverse, whether that's just
creating platforms and applications. They've the rumor to have started their own hardware business and start looking at building their own v R a R headset. So some lard of what Meta Platforms is doing, but at a much smaller scale, And it goes back to the cost efficiencies and in the rational size of the investments. You know, Meta is spending ten billion dollars plus a year and growing in apex,
building out Horizon and all of the hardware. You know, ten Cents team is only a couple hundred people, as the report said, So it's a much more smaller startup scale. And I think it's the right move because this long term vision for what the Meta has really is is still whether it's five, seven, ten years away, it's still a long ways away from being realistic. So you have some green shoots there as you mentioned, uh, and also
that sort of more disciplined in the management thinking. But then on the I would guess slightly negative side, the size of ten Cent and the size of Ali Baba seemed to be a problem for the Communist Party and and this common prosperity seems like when when the government is not your friend, when the regulator is not your friend,
it makes a very difficult path going forward. How much is that weighing on ten Cents, It absolutely waying, And they're still uncertainty there, and that's what makes it way even further. You know, we still haven't seen all of the rules and regulations we passed around what they call the platform economy. So these large internet companies like Ali Baba,
ten Cent, Pipe Dance, etcetera. And so as those rules and regulations you know, come out over the next few months, as we expect, we'll get more clarity on what the future looks like. But you know, for example, there's still uncertainty around the fintech business. Ten cents not even sure yet if they need to get a bank a bank holding license for that business or if it can continue to operate as it is, and so they're waiting on the regulations to be formally codified, and so there's uncertainty
till we get there. Now, what is encouraging is they seem to, uh, you know, be at a point where they're unraveling some of the web. You know, if we look at they've divested Steaks and j D dot Com and see Limited. There was rumors they were going to
divest their Steak in Matuan. They shot that down on the earnings call, but even so, you know, there it does kind of make sense for them to start unraveling that that web of investees in kind of whole horizontally competitive businesses because although they don't own these business and operate in then they have very you know, they have very good partnerships, and you know, there's a lot of competitive factors that the government's going to look at and say,
you might be holding back on consumer value here, and particularly as they push more. The problem is that you know that they're being forced to sell what could be very valuable investments at a very bad time. They still made a tremendous return on most of their investments. If you look at their portfolio, they're they're the ten cents, one of the most prolific investors in global technology across
interactive Internet, etcetera. And so you know, even if they're selling it what we think are the lows of the market over the last six tall months for Chinese tech, it's still a tremendous value creation. And if they can leverage that capital to repurchase shares as they talked about, or distribute the shares in those companies two shareholders, you know as de stock dividends, I think there's a lot of value that can be unlocked and that's always been
kind of the bear case for ten cents. They have this huge investment portfolio. How are they going to unlock it and recognize it? The JD dot Com started to give us a template for that, and we have to see if they can keep doing that. What about their video channels, the likes of we chat and taking on the likes of TikTok as well. They kind of getting to that point where they will be more integrated in the West. Ten Cent and we Chat probably not as
well known outside Asia. Yeah, I mean that that's a great question in terms of building that social business outside of Asia, outside of China. For now, it seems focused on the domestic market. The international business is really focused on you know, if we think about it, it's the gaming business and and then then you know, the cloud business is growing in kind of other parts of Asia as well, But for most part, the international business is really being driven by gaming. You know, we'll see if
they can make inroads. I think it would be difficult given all the political you know, pushes on both sides, right both in China and in the West. In terms of building these platforms that run on algorithms and lots of data right, and already seeing TikTok gets continued pressure.
The FCC today just coming out with something else in the US about how TikTok posts risks and so, you know, it's probably a difficult task, but there's so much room to unlock value in China for advertisers with short video because even do you in you know that the China equivalent of TikTok is is still ramping up their advertising from low levels. Curious about what happened with May twin, so James Mitchell sort of poured cold water on that
Reuter's report and the stock Matwin went up. But the other stocks, the other companies that ten Cent has a big chunk of, they fell in their US trading, and what's going on there, I think I think it just reflects the fact that after the JD dot Com divestiture and after c Limited, we're starting to wake up to the fact that ten Cent is going to start to potentially consider, you know, selling off, distributing out whatever it is some of the more mature investments that they have
in these companies, whether it be at Billy Billy or a Tinto or whomever. And so as they as they look across the ecosystem. You know, these are the companies maytwan obviously balanced when they said they're not doing it right now all, but that's not off the cards forever,
I don't think. You know, as these businesses get to a mature stage where they no longer require ten cents expertise to help guide their strategy and growth, and they get to a stable, mature state, you know that that's the point where Tencent can look at the harvest value. Matthew final quick yes or no answer. Do you think this is the first and last time we'll see ten cents sales full? Yes, I think it's the last time. I think there's some promising green shoots to help us
get back to growth in the second half of the year. Oh, bold call, excellent, Thanks very much, Matthew, good stuff. Really enjoyed having you with us. Matthew cantum In their director of research at Ball Metaverse Research Partners,