Speaker 1: Matthew Canterman joins this director of research yet Ball Metaverse
Speaker 1: Research Partners to take a closer look at ten Cent. Boy,
Speaker 1: this is a complex picture here. On these shares traded
Speaker 1: a little higher in the U s A d r
Speaker 1: s up three percent, Matthew, and that's after the process shares.
Speaker 1: The nasper's assets of ten Cent treated flat in Europe.
Speaker 1: So it's a little confusing. I guess. On the positive side,
Speaker 1: investors seem to like the cost cutting and the management discipline.
Speaker 1: I think, so it's the cost cutting is really impressive.
Speaker 1: You know, they slashed about five thousand jobs quarter over quarter,
Speaker 1: which is a lot of people, but you know, it
Speaker 1: really makes a difference. And I also think there's some
Speaker 1: green shoots and some of the new businesses like advertising.
Speaker 1: You know, ten Cent kind of has a clone of
Speaker 1: a TikTok do in it's their short video program. It's
Speaker 1: really getting a lot of engagement. But they only just
Speaker 1: started monetizing it in July, and the initial trends that
Speaker 1: they discussed are really really encouraging. You know, they expect
Speaker 1: that to reach over a billion R and B i
Speaker 1: F quarterly revenue, you know, within a couple of quarters. Now,
Speaker 1: so it's really going to start ramping up. And although
Speaker 1: the macro environment for advertising and fintech and everything that's
Speaker 1: kind of macro sensitive is not great. We saw the
Speaker 1: July retail numbers in China not great, having these new
Speaker 1: businesses that are organically growing from basically zero can really
Speaker 1: help them re accelerate the top line a lot sooner
Speaker 1: than maybe some people thought. Alright, so you saying advertising
Speaker 1: will come back, you'll focus very much on the beta verse.
Speaker 1: So now, Matthew, and how does that fit into ten
Speaker 1: cents future growth? Absolutely? I mean, you know, ten Cent
Speaker 1: is the global leader and interactive entertainment. And as we
Speaker 1: think about the metaverse at Fall Metaverse Research Partners and
Speaker 1: you know, ten Cents a member of our fall Fall
Speaker 1: Metaverse Index. You know, we think about it as the
Speaker 1: evolution of the Internet to encompass all things real time
Speaker 1: three D and so as a leader in developing real
Speaker 1: time three D experiences, ten Cent will be at the
Speaker 1: forefront of the development of the metaverse, whether that's just
Speaker 1: creating platforms and applications. They've the rumor to have started
Speaker 1: their own hardware business and start looking at building their
Speaker 1: own v R a R headset. So some lard of
Speaker 1: what Meta Platforms is doing, but at a much smaller scale,
Speaker 1: And it goes back to the cost efficiencies and in
Speaker 1: the rational size of the investments. You know, Meta is
Speaker 1: spending ten billion dollars plus a year and growing in apex,
Speaker 1: building out Horizon and all of the hardware. You know,
Speaker 1: ten Cents team is only a couple hundred people, as
Speaker 1: the report said, So it's a much more smaller startup scale.
Speaker 1: And I think it's the right move because this long
Speaker 1: term vision for what the Meta has really is is
Speaker 1: still whether it's five, seven, ten years away, it's still
Speaker 1: a long ways away from being realistic. So you have
Speaker 1: some green shoots there as you mentioned, uh, and also
Speaker 1: that sort of more disciplined in the management thinking. But
Speaker 1: then on the I would guess slightly negative side, the
Speaker 1: size of ten Cent and the size of Ali Baba
Speaker 1: seemed to be a problem for the Communist Party and
Speaker 1: and this common prosperity seems like when when the government
Speaker 1: is not your friend, when the regulator is not your friend,
Speaker 1: it makes a very difficult path going forward. How much
Speaker 1: is that weighing on ten Cents, It absolutely waying, And
Speaker 1: they're still uncertainty there, and that's what makes it way
Speaker 1: even further. You know, we still haven't seen all of
Speaker 1: the rules and regulations we passed around what they call
Speaker 1: the platform economy. So these large internet companies like Ali Baba,
Speaker 1: ten Cent, Pipe Dance, etcetera. And so as those rules
Speaker 1: and regulations you know, come out over the next few months,
Speaker 1: as we expect, we'll get more clarity on what the
Speaker 1: future looks like. But you know, for example, there's still
Speaker 1: uncertainty around the fintech business. Ten cents not even sure
Speaker 1: yet if they need to get a bank a bank
Speaker 1: holding license for that business or if it can continue
Speaker 1: to operate as it is, and so they're waiting on
Speaker 1: the regulations to be formally codified, and so there's uncertainty
Speaker 1: till we get there. Now, what is encouraging is they
Speaker 1: seem to, uh, you know, be at a point where
Speaker 1: they're unraveling some of the web. You know, if we
Speaker 1: look at they've divested Steaks and j D dot Com
Speaker 1: and see Limited. There was rumors they were going to
Speaker 1: divest their Steak in Matuan. They shot that down on
Speaker 1: the earnings call, but even so, you know, there it
Speaker 1: does kind of make sense for them to start unraveling
Speaker 1: that that web of investees in kind of whole horizontally
Speaker 1: competitive businesses because although they don't own these business and
Speaker 1: operate in then they have very you know, they have
Speaker 1: very good partnerships, and you know, there's a lot of
Speaker 1: competitive factors that the government's going to look at and say,
Speaker 1: you might be holding back on consumer value here, and
Speaker 1: particularly as they push more. The problem is that you
Speaker 1: know that they're being forced to sell what could be
Speaker 1: very valuable investments at a very bad time. They still
Speaker 1: made a tremendous return on most of their investments. If
Speaker 1: you look at their portfolio, they're they're the ten cents,
Speaker 1: one of the most prolific investors in global technology across
Speaker 1: interactive Internet, etcetera. And so you know, even if they're
Speaker 1: selling it what we think are the lows of the
Speaker 1: market over the last six tall months for Chinese tech,
Speaker 1: it's still a tremendous value creation. And if they can
Speaker 1: leverage that capital to repurchase shares as they talked about,
Speaker 1: or distribute the shares in those companies two shareholders, you
Speaker 1: know as de stock dividends, I think there's a lot
Speaker 1: of value that can be unlocked and that's always been
Speaker 1: kind of the bear case for ten cents. They have
Speaker 1: this huge investment portfolio. How are they going to unlock
Speaker 1: it and recognize it? The JD dot Com started to
Speaker 1: give us a template for that, and we have to
Speaker 1: see if they can keep doing that. What about their
Speaker 1: video channels, the likes of we chat and taking on
Speaker 1: the likes of TikTok as well. They kind of getting
Speaker 1: to that point where they will be more integrated in
Speaker 1: the West. Ten Cent and we Chat probably not as
Speaker 1: well known outside Asia. Yeah, I mean that that's a
Speaker 1: great question in terms of building that social business outside
Speaker 1: of Asia, outside of China. For now, it seems focused
Speaker 1: on the domestic market. The international business is really focused
Speaker 1: on you know, if we think about it, it's the
Speaker 1: gaming business and and then then you know, the cloud
Speaker 1: business is growing in kind of other parts of Asia
Speaker 1: as well, But for most part, the international business is
Speaker 1: really being driven by gaming. You know, we'll see if
Speaker 1: they can make inroads. I think it would be difficult
Speaker 1: given all the political you know, pushes on both sides,
Speaker 1: right both in China and in the West. In terms
Speaker 1: of building these platforms that run on algorithms and lots
Speaker 1: of data right, and already seeing TikTok gets continued pressure.
Speaker 1: The FCC today just coming out with something else in
Speaker 1: the US about how TikTok posts risks and so, you know,
Speaker 1: it's probably a difficult task, but there's so much room
Speaker 1: to unlock value in China for advertisers with short video
Speaker 1: because even do you in you know that the China
Speaker 1: equivalent of TikTok is is still ramping up their advertising
Speaker 1: from low levels. Curious about what happened with May twin,
Speaker 1: so James Mitchell sort of poured cold water on that
Speaker 1: Reuter's report and the stock Matwin went up. But the
Speaker 1: other stocks, the other companies that ten Cent has a
Speaker 1: big chunk of, they fell in their US trading, and
Speaker 1: what's going on there, I think I think it just
Speaker 1: reflects the fact that after the JD dot Com divestiture
Speaker 1: and after c Limited, we're starting to wake up to
Speaker 1: the fact that ten Cent is going to start to
Speaker 1: potentially consider, you know, selling off, distributing out whatever it
Speaker 1: is some of the more mature investments that they have
Speaker 1: in these companies, whether it be at Billy Billy or
Speaker 1: a Tinto or whomever. And so as they as they
Speaker 1: look across the ecosystem. You know, these are the companies
Speaker 1: maytwan obviously balanced when they said they're not doing it
Speaker 1: right now all, but that's not off the cards forever,
Speaker 1: I don't think. You know, as these businesses get to
Speaker 1: a mature stage where they no longer require ten cents
Speaker 1: expertise to help guide their strategy and growth, and they
Speaker 1: get to a stable, mature state, you know that that's
Speaker 1: the point where Tencent can look at the harvest value.
Speaker 1: Matthew final quick yes or no answer. Do you think
Speaker 1: this is the first and last time we'll see ten
Speaker 1: cents sales full? Yes, I think it's the last time.
Speaker 1: I think there's some promising green shoots to help us
Speaker 1: get back to growth in the second half of the year. Oh,
Speaker 1: bold call, excellent, Thanks very much, Matthew, good stuff. Really
Speaker 1: enjoyed having you with us. Matthew cantum In their director
Speaker 1: of research at Ball Metaverse Research Partners,