Morningstar: Maintains TENCENT (00700) fair value at HK$780 per share; Muse topping the App charts may bring upside.

Morningstar released a research report maintaining its fair value estimate of HK$780 per share for TENCENT (00700), which possesses a wide economic moat. Meta's (META.US) launch of personal AI assistant Muse, which topped the U.S. iOS App Store charts, sends a positive signal of strong consumer demand for AI agents, although users' willingness to pay remains to be verified. On September 22, Muse topped the U.S. App Store and drove Meta's stock price up 11%, which in turn caused Tencent's stock to rise as much as 7% during intraday trading. Investors viewed Muse's market popularity as a positive signal for Tencent, as Tencent is also testing a similar AI agent called "Xiaowei" within WeChat. Morningstar noted that Muse's success did not change its earnings forecasts for Tencent, but challenged a prior market assumption that Tencent's AI agent business has minimal or even negative economic valuea view that has caused Tencent's stock to fall nearly 30% year-to-date. Currently, Morningstar's fair value estimate does not yet factor in the "Xiaowei" business. Compared to Muse, Xiaowei has structural advantages, as it is embedded in WeChat, China's most widely used app, while Muse is a standalone app that requires a separate download. Morningstar believes there are three potential monetization paths: first, taking commissions from transactions facilitated by the agent; second, leveraging richer user intent signals collected by Xiaowei to enable more precise ad targeting, thereby boosting advertising revenue; and third, introducing paid subscription tiers for users who access premium AI features. None of these revenue sources are currently included in its valuation.