Research archive for NPN

Even though Tencent was down 1% in Hong Kong yesterday, Naspers closed up 4%. A divergence that doesn't happen often. In the case of Naspers, the company gave a roadmap for the listing of their international assets.

On Friday Naspers announced that they are swapping their shares in MakeMyTrip, a US-listed Indian travel company, for shares in Ctrip, the largest online travel company in China. Ctrip is also listed in the US. This deal valued Naspers' MakeMyTrip stake at $1.3 billion, a 25% premium to what the shares were worth on Friday morning. The deal means that Naspers has swapped its 40% stake in a $2.4 billion company for a 5.6% stake in a $24 billion company.

Yesterday, shortly before the market opened, Naspers announced that they intend to list their international internet assets in Amsterdam. You can read the announcement here - Naspers SENS. At one point in the morning, Naspers was higher by 1% while at the same time Tencent was down 3% in Hong Kong, effectively meaning that Naspers was up 4% on this news. At the close of the market though Naspers was down 1.6%. Tencent had closed down 3.1% so I would say that is a net gain.

Tencent continues to diversify its business. It is a not a one trick pony by a long stretch but the regulatory environment in China is a risk. This time they have put $150m into Reddit. This values the business at $3bn. Reddit is a US based social news aggregation site. Users submit content and other users rate and discuss said content. Apparently last year the company had 542 million monthly visitors.

Slowly but surely Naspers have been deploying their excess cash from the sale of some Tencent shares last year. On Friday Naspers said they bought out minority shareholders in a business called Avito, a Russian classifieds business. The investment was worth US$1.16 billion, at an implied enterprise value of US$3.85 billion, to acquire a further 29.1% stake in Avito which will fall within the OLX group for Naspers.

On Friday at 15:00 Naspers released their 6-month numbers. I love reading about how all their global operations are doing; Naspers offers us in Mzanzi the opportunity to invest in the global tech space. Generally speaking, the movements in the Tencent share price are more influential on Naspers than their results, it is still worth seeing how their other ventures are doing.

According to Bloomberg, it is rumoured that Naspers will again be participating in Swiggy's third fund-raising round of the year, where the company is looking to raise approximately $600 million. Swiggy is an online food-ordering and delivery business based in Bangalore, India. The company was founded in 2013 on the ethos of delivering food to the urban foodie from their favourite restaurants, a trend that is taking off like a rocket ship.

As Michael alluded to earlier, Naspers will be spinning off Multichoice early next year. This is a significant move from a management team who are seriously trying to unlock value after a lot of pressure from shareholders.

Yesterday I spent the morning reading through Naspers remuneration reports from their last two financial years. Executive remuneration is always a tough subject to approach. What is the appropriate amount to pay the leaders of these multinational organisations? As I have said many times before, at the end of the day, it is a shareholder decision, and if shareholders don't object at the AGM then they can't complain. Also if you are not a shareholder, other things in South Africa are much more worthy of getting hot and bothered about.

On Friday Naspers reported their highly anticipated full-year results. The company has a huge following here in SA for obvious reasons. Before we look at the separate businesses, let's first look at the numbers.

The big news yesterday was Walmart confirming their $16 billion purchase of India's Flipkart. For Naspers, they ended up selling their entire 11.18% stake for $2.2 billion, very good going considering that they only invested $616 million. Over the last two months Naspers has realised $12 billion from sales in their holdings, a nice and juicy R150 billion looking for a home. Here is what the company say they have the money earmarked for:

Our most important local stock holding, by far, is Naspers. Its our largest holding in almost all JSE portfolios. In our view, it should be trading at twice the share price that it is today. The aggregate value of its various Internet and media assets far exceeds its current value on the market.

Last week we received interim 6 month results from Naspers. Being by far the biggest company on the JSE, this event now attracts a lot of attention. As expected, the results looked stellar on the back of another incredible period for Tencent. Let us take a look at the numbers which remember, are now reported in dollars.

The Tencent 2Q numbers didn't disappoint when they were released after market close in Hong Kong yesterday. This was in the middle of our trading day, the Naspers share price immediately shot 4% higher. Tencent is up 3.5% today. The numbers beat on top and bottom line, with revenues up 59% YoY and EPS up 44% YoY. What is amazing is the QoQ growth, where revenue is 14% higher than 3 months ago and profits are 17% higher. Most companies would be happy with that level of growth over twelve months instead of just three.

Tomorrow Tencent report 2Q numbers, probably the most significant set of numbers for the JSE even though they don't even trade here. The numbers are out at around lunchtime. In Jozi that will set the tone for Naspers and by extension our market. I found this very interesting slide show talking about why Tencent is such an amazing business, Tencent's Wide Moat. If you don't fully understand why we think Tencent and Naspers are such great businesses this slide should help.