TenCent is huge

After the Koos Bekker news, Naspers short tremors had something to chew on, the stock eventually ended the session higher. Up 1.5 percent on the day, well, 1.46 percent to be exact. The stock nearly crossed 1300 Rand for the first time and is up nearly 19 percent year to date. TenCent, listed in Hong Kong, how has that done? Well, it should come as no surprise whatsoever that TenCent is up 18.2 percent year to date and is trading near their all time highs. So, follow TenCent and that will = Naspers. For now.


If you needed a gentle reminder, take the TenCent market cap in Hong Kong, which right now is 1.09 trillion Hong Kong Dollars. Naspers owns 34.5 percent of TenCent, that translates to 376.05 billion Hong Kong Dollars. Now one Hong Kong Dollar is equal to 1.39 Rands. So, quite simply, multiply 376.05 billion HKD by 1.39 and that equals 522.7 billion Rand. Naspers closed at 1290 Rand last evening, which translates to 536.5 billion Rand. The rest of Naspers is worth less that 14 billion Rand, according to the market participants. Businesses like their pay TV business, which generated 4.5 billion Rand in trading profits, for the half year to end September basically as valued at zero. I suppose that their ecommerce business registered a trading loss of 1.8 billion Rand, that counts for something! Mail.ru, their other significant investment made Naspers 601 million Rand for their first half.


So why is TenCent then given a discount by the South African investor crowds? Do we (South Africans) feel that somehow the Hong Kong investors stretch the valuation of TenCent too far and we should really show them how it is done? Discount a valuation that another market already values. It does not really make sense that Mr. Market here discounts what I think is a pretty efficient market there in Hong Kong. I think it does smack a little of conservative arrogance or perhaps it is a misunderstanding of TenCent growth, either one or the other. Whatever it is, I still think that Naspers is a buy, but will from time to time go through periods of extreme volatility, because the TenCent multiple is so aggressive. Which ever way we do not have to wait too long until we find out a whole lot more about TenCent and their full year numbers for their 2013 financial year, pen into your diaries the 19th of March.

I still think that a lot of investors struggle to understand what TenCent is exactly. Well, they are a chat service, they are a gaming service, they are a music service, they offer other online services that includes film, fashion, there is a search engine (soso.com - recently merged with sogou.com), the biggest of the lot of course is the QQ.com portal. Tenpay and Paipai are both online web portals, one is ecommerce and the other offers payment systems. Perhaps if all the platforms were in English, the English speaking investor community would understand these businesses better.


If you want to understand how TenCent actually monetises their platforms, search no further than here, a fabulous breakdown: Tencent Service Offerings. so whilst you have seen a slowdown on some fronts with regards to paid for services, the potential base could grown tenfold (on the paid side). We continue to hold the company and we are really thrilled to see what Koos Bekker comes back with once his head and mind are cleared of the day to day fog of running a business.