{"id":192812,"date":"2017-08-16T12:42:51","date_gmt":"2017-08-16T10:42:51","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=192812"},"modified":"2017-08-16T12:42:51","modified_gmt":"2017-08-16T10:42:51","slug":"naspers-doesnt-have-another-genie-in-the-bottle-opinion","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/internet\/192812\/naspers-doesnt-have-another-genie-in-the-bottle-opinion\/","title":{"rendered":"Naspers doesn’t have another genie in the bottle: opinion"},"content":{"rendered":"

Naspers’s conglomerate discount is widening. Its\u00a0one-third stake in Tencent Holdings alone is now worth 27% more than the South African internet company’s entire market cap.<\/p>\n

After a 70% increase in its stock so far this year, Tencent is valued at a whopping 54 times earnings, almost twice the 30 times for Google’s owner, Alphabet.<\/p>\n

Why don’t investors prefer Naspers? The Cape Town-based company is still trading at a more reasonable 36 times profit.<\/p>\n

Much of Tencent’s gain has been driven by Chinese investors. Over the last month alone, mainlanders bought a net HK$6 billion ($767 million) or so of the shares\u00a0through the Hong Kong Shanghai Stock Connect.<\/p>\n

Their stake in the Shenzhen-based company has risen to 1.3%, from just 0.8% five months ago.<\/p>\n

One could argue that foreign investors are more skeptical, and expect Tencent’s shares to correct after its second-quarter earnings, due later Wednesday.<\/p>\n

More likely, though, they suspect Naspers is a one-trick pony.<\/p>\n

The South African company’s $32 million investment in Tencent, in 2001, was the deal of the century: That stake is now valued at $128 billion.<\/p>\n

But Naspers doesn’t have another genie in the bottle.<\/p>\n

Its\u00a0biggest disposal\u00a0was the $3.3 billion sale of a Poland-based online auction site, Allegro, last year. Naspers bought the company in 2008 for $1.6 billion, making the annual return a relatively unimpressive 10%.<\/p>\n

If we\u00a0strip out Tencent’s numbers, Naspers has been bleeding cash in its core operations for two straight years.<\/p>\n

Unless it can show earnings from other holdings can outpace those from Tencent, investors may think it just got lucky.<\/p>\n

<\/div>\n
\"\"<\/a>Currently, there’s no way for Naspers to monetize its stake in the Chinese company except by selling it.<\/div>\n

Tencent hands out hardly any cash – its dividend payout ratio is only 12.4%.<\/p>\n

So why doesn’t Naspers offload some of its Tencent shares?<\/p>\n

Naspers is a hoarder, quite unlike a venture-capital fund that typically trades in and out of technology assets every five to seven years.<\/p>\n

Since 2005, the company has spent $8.2 billion buying stakes from Russia’s largest classified website to India’s most prominent\u00a0e-commerce\u00a0provider.<\/p>\n

But disposals have been few and far between: A total of $4.9 billion, of which $3.3 billion was Allegro.<\/p>\n

<\/div>\n
\"\"<\/a><\/div>\n

Some would say it’s sensible to retain a strategic stake in one of the world’s seven biggest technology companies. Even from a high base, Tencent is expected to increase earnings by 27% annually over the next three to five years, according to data compiled by Bloomberg.<\/p>\n

Owning Tencent puts Naspers in the same league as SoftBank Group, which has a broader base of technology investments.<\/p>\n

<\/div>\n
\"\"<\/a><\/div>\n

Precisely because of this over-reliance on Tencent, Naspers needs to show it’s running on more than luck. Otherwise, that valuation discount won’t close.<\/p>\n

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.<\/p>\n

\n

Read: Naspers earnings soar as revenue climbs to $14.6 billion<\/a><\/strong><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Naspers’s conglomerate discount is widening. Its one-third stake in Tencent Holdings alone is now worth 27% more than the South African internet company’s entire market cap.<\/p>\n","protected":false},"author":59,"featured_media":7866,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9882],"tags":[107,1977],"class_list":["post-192812","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-internet","tag-naspers","tag-tencent"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/192812","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=192812"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/192812\/revisions"}],"predecessor-version":[{"id":192836,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/192812\/revisions\/192836"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/7866"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=192812"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=192812"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=192812"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}