Regulatory pressure, especially the restriction on gaming, has weighed on Tencent's business. As Tencent ramped up its buyback and dividend programs, investors wondered if Tencent was becoming a value play. We disagree, and to be more specific, we see this is most likely a temporary phase. Instead of becoming a value stock, Tencent re-emphasizes its business focus and breeds new growth drivers. Let's not overlook these positive developments.

International gaming is an area that might soon provide upside surprises. It's in Tencent's wheelhouse, and the gaming market abroad faces far less regulatory pressure. In 2021, Tencent was ramping up international gaming investment and owned 26 international studios already. In addition to investing in studios, Tencent also branched out internationally, setting up a studio in Canada, publishing presence in Europe and Singapore. Altogether, these international studios will likely produce 30+ new games between 2022 and 2024. 10+ games are already announced to be released in 2022.

Tencent also starts to disclose its international gaming revenue separately, showing the management's adoring of the market as a bright growth spot. In the next few years, we think Tencent's gaming business narrative could change from domestic play under strict regulation to an overseas expansion story, with the potential to take on international peers.