Tencent to post steepest profit fall in 13 years on games setback

* Q4 net profit seen at 18.3 bln yuan, down 12 pct y/y

* Revenue likely to grow 25 pct vs 51 pct growth year ago

* Eyes on game approval updates and impact of economic

slowdown

By Sijia Jiang

HONG KONG, March 21 (Reuters) - Tencent Holdings

is set to report on Thursday its sharpest quarterly profit

decline in more than 13 years, as its failure to launch new

blockbuster games due to China's regulatory review capped

revenue growth.

China resumed new gaming approvals in December after a

nine-month hiatus partly due to concerns over violent content

and gaming addition.

But it has yet to allow Tencent, Asia's second-most valuable

listed company, to charge users for such hit games as

"PlayerUnKnown's Battlegrounds Mobile" and "Fortnite: Battle

Royale".

Investors will be keenly watching for updates from Tencent's

top management about the games approval process and whether it

will participate in a multi-billion-dollar bid for South Korean

gaming firm Nexon to beef up its games portfolio.

Tencent is likely to report a 12 percent drop in net profit

for the quarter ended in December to 18.3 billion yuan ($2.7

billion), according to the average estimate of analysts compiled

by Refinitiv.

That would mark its steepest profit decline since the third

quarter of 2005.

Revenue is seen at a record 83 billion yuan, but growth will

halve to 25 percent from 51 percent a year ago, underscoring

damages incurred due to the regulatory hurdles.

Jefferies analyst Karen Chan said in a note that Tencent's

near term mobile game revenue will likely remain under pressure

but would accelerate in the second half of 2019 with new

launches and a lower comparison base. "Long-term thesis remains

intact despite near-term mobile game growth volatility," she

wrote.

But Ming Lu, an analyst who publishes on Smartkarma, said he

believes Tencent benefited from the license suspension, as it

increased its market share during that period when smaller

players perished. "The market share increase in the active user

base will bring an increase in revenues during 2019," he said.

Tencent, which operates China's most popular social media

platform WeChat, also needs to address investor concerns about

the impact of China's slowing economy on its income from

consumers and advertisers as well as threat from new competitors

such as Tik Tok.

Chinese GDP grew at the slowest rate in nearly three decades

last year and is likely to further decelerate this year amid a

trade war with the United States.

Tencent in September announced a restructuring aimed at

moving from being consumer-focused to serve industries as well,

and created a new Cloud and Smart Industries business group, but

those steps have yet to make a mark on its bottom line.

Tencent's results could still beat expectations on

investment gains like they did in the third quarter as it took

several portfolio firms public last quarter including Tencent

Music Entertainment , gaming developer iDreamsky

Technology Holdings and fashion e-commerce firm Mogu

Inc , analysts said.

Shares in Tencent have risen 18 percent so far this year,

giving it a market capitalisation of $449 billion, second only

in Asia to Chinese e-commerce firm Alibaba Group Holding

. But the stock is still 22 percent below its peak of

HK$476.6 reached more than a year ago.

($1 = 7.8499 Hong Kong dollars)

($1 = 6.7123 Chinese yuan renminbi)

(Reporting by Sijia Jiang; Editing by Miyoung Kim and

Muralikumar Anantharaman)