Is There Still Upside To Naspers?
28 September 2018 | Stephan Maritz
 


The big giant on the JSE has been trading mostly sideways since the beginning of the year. It has traded predominantly between R2,800 and R3,800 unable of breaking one way or the other, mostly tracking Tencent’s performance. Below we take a closer look at this correlation and what we believe might happen to Naspers leading up to their annual results close to the end of the year.

I’m pretty sure that everybody who follows the Naspers share price first has a look at what Tencent’s share price did that morning in Hong Kong, long before the JSE opens. This normally provides you with a good estimate of what you can expect from Naspers for that day.

Lately however, that correlation has been less apparent. On the 22nd of March 2018, Naspers sold 2% of its 33.2% stake in Tencent though an accelerated bookbuild. After this sale, there seems to have been a divergence in the performance of Naspers and Tencent with less of Naspers’ performance being explained by that of Tencent. This can be seen on the chart below, which shows how the two shares have performed for the year so far, and how the difference in performance between them has varied:

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One of the biggest headaches for Naspers’ directors have been the discount of Naspers to its underlying assets, especially when looking at the value of their Tencent holding. Their plan to narrow the discount is to free up funds to finance future growth projects and accelerate the growth in their classifieds, online food delivery and fintech business globally.

In order to achieve this, they have sold their entire Flipkart stake, their stake in TBO Group (online travel distribution business) and reduced their holding in Tencent as mentioned above. They have used these funds for numerous investments this year, including Swiggy (Indian online food ordering and delivery platform), Movile (global leader in mobile marketplaces), PaySense (Indian credit provider), Zooz (Israeli payment technology platform), letgo (American app for second-hand buying and selling), Webuycars (local car-buying service) and closed the Delivery Hero acquisition from Rocket Internet SE to become Delivery Hero’s largest shareholder - all of this in 2018.

Last week they also announced they are listing their Video Entertainment business separately on the JSE as the Multichoice group.

All of this sounds promising, although it will take time for value to reflect. What is very encouraging is how proactive they have been. Focusing more on the short-term, Naspers’ annual results are due at the end of November and we expect the share price to climb steadily as we get closer to the date, of course with its usual volatility.

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Stephan

Stephan Maritz
Portfolio Manager

Stephan is a portfolio manager and full-time trader. He developed his passion for the markets while working in the Stockbroking division of Standard Bank and is especially passionate about CFD trading. Stephan studied at the University of Stellenbosch and completed a BComm Honours (Business Management) with a focus in Portfolio Management and Bonds. He has also passed the JSE Equity Trader’s Exam, RE5 (Representative) and RE1 (Key individual) Exams as well as the Registered Persons Exams (RPEs) in order to give advice on equities.
 


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