Naspers is asking Investec to withdraw an analyst report that it says contains errors and has damaged Africa’s biggest company by market value and its shareholders.
In the note dated Jan. 22 seen by Bloomberg News, Investec analysts David Smith and Thapelo Mokonyane said Naspers should be valued at a 30% discount to its assets. That’s due to a gradual increase in the number of outstanding shares over 11 years, taxation issues and costs associated with financial transactions, referred to in the report as friction costs, they said.
“While we believe that everyone is entitled to their views, the Investec report on Naspers contains factual inaccuracies and misleading information,” Meloy Horn, head of investor relations at Naspers, said in an emailed response to questions about the note. “The report is causing us and shareholders significant damage. We will therefore be writing to Investec and formally ask them to withdraw the report and correct these matters.”
Investec and the analysts declined to comment. The Johannesburg-based lender’s hold rating is the only one out of 16 analysts tracked by Bloomberg, with all others a buy.
Naspers stock, which accounts for almost a fifth of the weight of the Johannesburg stock exchange All Share Index, has fallen more than 16% since the report was released and is trading at a four-month low. About R200 billion ($16.6 billion) has been wiped off the value of the company in six consecutive trading days of declines.
The shares closed 3.9% lower at R3,120 in Johannesburg on Monday, valuing the company at almost R1.4 trillion.
“The Investec report on Naspers may have contributed to the share price pressure but there are other factors such as a stronger rand,” Peter Takaendesa, portfolio manager at Mergence Investment managers in Cape Town, said by email. “We saw some other brokers reducing their price targets on Naspers.”
Naspers has long traded at a discount to its 33% stake in Chinese internet giant Tencent Holdings – the company’s crown jewel – which the South African business bought in 2001. Chief executive officer Bob Van Dijk has been looking for new investments to replicate that success and help close the valuation gap, and has put cash into a range of global internet companies from the US to Russia and India.
Naspers’s stock has ridden the coat tails of Tencent as it became China’s biggest company, and is the third-best performer on the FTSE/JSE Top 40 Index over the past 12 months even after recent declines. Tencent has dropped 2.5% since Jan. 22, which may also have contributed to Naspers’s fall, according to Horn.
The analysts used an “unrealistically high base” for annual dilution, which made them conclude that “massive” shareholder dilution of about 30% is likely in future, Horn said.
“We are not asking Investec not to publish a report,” she said. “All we are asking is that they retract the current version with the inaccuracies so that people do not rely on it, and re-issue it incorporating the correct facts and calculations.”