If you believe Tencent Holdings Ltd. is fundamentally a games and social media company with a portfolio of investments that add to profit, then first-quarter numbers weren’t so hot.

If, on the other hand, you view the Chinese internet giant as a holding company set up to invest in businesses around the globe, then they were great.

As reported, operating margin climbed to 42 percent for the three months through March, from 39 percent a year earlier. But that includes interest income and other gains. This miscellaneous “others” category accounted for 24.7 percent of operating profit and includes fair-value gains from investee companies.

Stripping out interest and others, core operating margin slipped below 30 percent from 31 percent a year prior. This approach doesn’t affect net profit.

There’s an argument to be made for stripping out extraneous items because Tencent runs the games and social side of the business itself, but doesn’t have direct control over investees. Yet its considerable portfolio is an ongoing theme, so results in that realm can’t be dismissed as one-time events.

In the end, investors have a choice: Operating margin rose or operating margin fell. Take your pick.


To contact the author of this story: Tim Culpan at tculpan1@bloomberg.net

To contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net

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