I promised you some different insight into Naspers on Friday

I promised you some different insight into Naspers on Friday. I tell you, it is not easy. First things first, the cash cow, the DSTV business makes over 5 billion ZAR in profits off less than 17 billion ZAR worth of turnover, in a year. And the business has been growing steadily at around 15 percent per annum. What would you pay for such a business? 12 times earnings? 10 times? OK, let us say 11 times earnings to be fair, so we have the first part of our back of the matchbox valuation model working here:



DSTV/Multichoice = 55 billion ZAR.



Easy enough then, we have a 35 percent stake in TenCent which has a market valuation today (the whole thing) of 325 billion Hong Kong Dollars (HKD). 35 percent of the whole thing is 113.75 billion HKD. One HKD = 0.9 ZAR. That translates to a little more than 102 billion ZAR.




35 percent of Tencent = 102 billion ZAR.



I am sorry to say that a lot of the other businesses that they either own or have stakes in are smaller than these two. They have just short of 30 percent stake in Digital Sky Technologies (Mail.ru), which has listed in London for a valuation of about 5.4 billion US Dollars. So 30 percent of that is 1.62 billion Dollars, which equates to 11 and a third billion Rands.



+/- 30 percent of Mail.ru = 11 billion Rands.



So forget BuscePe (Naspers bought it for 342 million USD 2.4 bn ZAR), forget the local newspaper assets which make around 800 million ZAR (five times earnings = 4 bn ZAR). Is the market wrong here in assuming that the Hong Kong market participants are crazy in valuing TenCent at those types of valuations? Methinks that is exactly it, because add up these assets (I have left out Allegro which was bought for less than 1 bn GBP (946 mn GBP) = 10.4 bn ZAR back in 2007) and you get to the princely sum of the parts of 175 bn ZAR. At the current share price – 363 ZAR the enterprise is valued in Jozi at 147 bn ZAR. And in fairness the market discounts it for a reason, the earnings stream from the internet businesses are patchy at best.



What you don't even see here is Ibibo. Who? What? Ibibo is a JV in India between TenCent and Naspers. No guessing what they are up to there, if they can turn the excitement that has been generated by TenCent in China to even a quarter of that in India, who knows what the business should be valued at. India is a long way from being close to China. Plus there is also a cultural difference. How do you know what is good for the Chinese will be good for the Indians. I have signed up for both sites and snooped around, TenCent is impressive, better than I thought. Ibibo looked a lot like Facebook, in fact there is a plug in of sorts. I will still maintain that Naspers looks cheap, even at these levels and in the fullness of time folks will come to the realisation that these assets will be bigger contributors.