Naspers results confirm disparity
• US and UK investors will be approached about a bond issue to be used for expansion and refinancing debt
Naspers’s latest results appear to reinforce shareholder concern about the divergence in performance between the group’s 33% stake in Tencent and its e-commerce ventures. The results highlight Tencent’s dominance and the cash-guzzling nature of the e-commerce ventures.
Naspers’s latest results appear to reinforce shareholder concern about the divergence in performance between the group’s 33% stake in China-based Tencent and its e-commerce ventures.
The results highlighted Tencent’s dominance and the cashguzzling nature of the e-commerce ventures.
Bloomberg reports Naspers would approach US and UK investors on a bond issue, which CEO Bob van Dijk said would be used for expansion and to refinance some of its current debt.
Fairtree Capital’s Jean Pierre Verster said several factors should help soothe shareholder concerns about Naspers’s value trap. “Development spend on e-commerce has increased, but at a slower rate and a number of e-commerce divisions are reporting profit,” he said.
Disclosure had improved, Verster said. The group appeared to be nearing the end of major spending.
“In the next year or two, we might see a listing of some of the e-commerce businesses.”
On Friday, Naspers’s share price closed 2.6% higher at R2,639 following the release of full-year results to March. Core headline earnings increased 41% to $1.8bn. Fully diluted core headline earnings per N share were up 36% to 406c. Once more, Tencent was the outstanding performer, outweighing losses in the businessto-consumer business and the sub-Saharan Africa video entertainment business, as well as increased development spend.
Tencent’s revenue contribution increased 39%, e-commerce revenue advanced 11%, while video-entertainment (MultiChoice and DStv) was unchanged and media (Media24) shrank 3%.
Divisional contributions to trading profit were a stark reminder of the importance of Tencent. The internet company increased its trading profit contribution 39%. Reflecting the effect of hefty development spending, contribution from e-commerce was down 9%. Video entertainment’s contribution to trading profit plummeted 53% and media’s contribution dropped 34%.
E-commerce, which has a plethora of businesses across the world, was hit by development spend and losses, but 21 of the businesses posted a profit.
Two cash-hungry businesses were letgo, which is investing heavily to get into the US market, and India-based e-tail associate Flipkart. The management said letgo’s results were encouraging and “investment in the US market and elsewhere will continue for several years”.
Video entertainment, which is the MultiChoice pay-TV business operating in sub-Saharan Africa, was hit by tough eco- nomic conditions and adverse currency movements. Customers are billed in local currencies but the bulk of the costbase is US-dollar denominated.
“Given the high fixed-cost base, continued subscriber growth is key to improving profitability,” Naspers said.
In SA, the subscriber base benefited from bouquet restructuring and more aggressive pricing. Media24 barely made an impact in the enormous global company. “Besides ongoing challenges from structural changes in the print media industry, the segment also continues to face tough macroeconomic conditions due to a weak … rand,” the management said.
The group would continue to migrate audiences to digital platforms and scale e-commerce interests while containing costs.
The JSE closed firmer on Friday, as the market warmed to Naspers’s annual results, reflecting revenue growth of 3% for the year ended-March.
Although the results were the usual mixture of a strong contribution from its Chinese Tencent investment, and losses at e-commerce and a subdued performance at video entertainment, the market reacted positively as Naspers ended the day 2.6% higher at R2,638.61. Its performance lifted the overall industrial index, with rand hedges closing in the red on the stronger currency.
The industrial index closed 0.99% higher, but was outclassed on the day by banks firming 1.25% and platinums gaining 1.03%. The all share ended 0.84% higher at 51,503.50 points and the blue-chip top 40 added 0.92%. The all share gained a weekly 1.32% and is 1.68% up for the year.
After a torrid week, ArcelorMittal SA gained 4.92% to R5.12. Remgro was up 3.92%, to R210.82. Impala Platinum gained 3.29% to R35.50.
Brait remained under pressure, losing a further 1.05% to R59.17 for a total loss of 11% in the week.
Redefine Properties rose 1.23% to R10.72, Growthpoint 1.05%, to R24.91, and Hammerson 1%, to R96.86.
The all share had a volatile week, recording gains for three days and sharp losses on the remaining two as analysts bemoaned the return of bearish sentiment following three years of trading sideways.
The rand was at R12.9156/$, from R12.9719/$, as the market awaited Parliamentary speaker Baleka Mbete’s decision on an open or secret ballot in a proposed vote of no confidence in President Jacob Zuma.
Local bonds firmed on the stronger rand, with the R186 bid at 8.52%, from 8.565%. Analysts said interest in bonds remained upbeat, with prices relatively contained when compared with the rand.
Futures tracked the stronger JSE, with the local near-dated, top-40 Alsi futures index 1.03% higher at 45,704 points. The number of contracts traded was 20,243, from Thursday’s 26,416.