February 4, 2023

Tencent Taking Minority Stake in U.K. Digital Bank Monzo – Report

Tencent Holdings (TCEHY) is in the process of acquiring a minority stake in U.K.-based lender Monzo. Sky News reports that the Chinese technology behemoth is investing in a minority stake as part of a $100 million capital injection. TCEHY’s share price fell 1.52% to close at $58.30 on December 31.

Tencent is an investment company that offers value-added services and online advertising services. TCEHY’s earnings report  for Q4 2021 is scheduled for March 23, 2022.

Tencent Investment

Tencent is the latest to add to Monzo’s growing investor portfolio, having already attracted Coatue and the Abu Dhabi Growth Fund so far. The U.K. lender has already raised $600 million, significantly bolstering its valuation with the addition of thousands of customers last year.

The investment comes as Monzo’s revenues are expected to more than double this year, backed by a solid customer base of over 5 million clients. The company is also expecting to add 100,000 new customers each month. Tencent’s dividends have been increasing steadily over the past three years. Its dividend yield currently stands at 0.31%, with a payout ratio of 6.01%

The Chinese tech giant has been on an investment drive as it expands its footprint outside China. It has already backed a number of European banking startups, including German N26. It also holds stakes in several U.S. tech companies, including Tesla (TSLA) and Snap.

Stock Rating

Consensus among analysts is a Moderate Buy based on 1 Buy.

Last month, Barclays analyst Jiong Shao reiterated a Buy rating on Tencent with a $79 price target, implying 35.51% upside potential to current levels. According to the analyst, Tencent is the most influential internet company in China and is well-positioned given that the country plays host to the second-largest economy in the world.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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