Naspers better for day traders than investors

Naspers’s quixotic mission to become a leading global e-commerce player continues unabatedly at a time when the JSE’s blue-chip top 40 has become increasingly dependent on the market heavyweight for its daily fix.

On Monday, Naspers contributed more than half of the 306-point move among the top 40, which recorded gains for the first time in more than a week.

When its 34% Chinese Tencent investment makes gains on the Hong Kong market, you may be certain that Naspers will gain on that day, with a weaker rand an added booster.

But also certain, alarmingly so, is Naspers’s market rating at a price:earnings ratio of 100.

Moody’s, however, in its rating of the group’s new $1bn bond to one notch above junk last week, has no fear that Naspers will default, though it does note that Tencent and execution risks with its e-commerce strategy are constraints.

Operational issues remain in focus. After spending $4bn on e-commerce growth in the past four years, losses amounted to $731m at end-March, not that far from the new bond’s full value, which will in any case be used to partly pay off debt.

The company’s cash in hand stands at $4bn, even after having sold Allegro for $3.25bn in 2015. Dumping dud assets continues unabated, the latest being in Turkey.

With Tencent pumping in a profit of $3bn at the end of March, it is becoming an even greater necessity for e-commerce to support the bottom line, of which there is now scant evidence.

The stricter application of game downloading on Tencent platforms, together with subdued progress with WeChat into the business sector, could be warning flashes. More so as video entertainment, essentially DStv, is unprofitable.

Even if e-commerce eventually takes off, the gains are already reflected in present values. That makes Naspers more suited to day trading than long-term investment.

Astral Foods says two new outbreaks of highly pathogenic avian influenza of the H5N8 strain are not from its operations, while the Department of Agriculture says the latest outbreaks were at commercial layer chicken farms in Gauteng and Mpumalanga.

This leaves other big poultry companies at risk after an initial outbreak at a relatively small Mpumalanga broiler breeder on June 19, with a second case a week later. South African Poultry Association CEO Kevin Lovell says only Astral has confirmed it has isolated the strain at a breeding site on the Gauteng-Free State border.

But he also says he knows that two other big companies affected by the flu have advised all their customers.

Four poultry sites in SA have now been affected and the new outbreaks have been quarantined. The department says this flu is not dangerous to humans.

The outbreaks follow one in Zimbabwe earlier in June, said to have been introduced by migratory wild birds. Stephen Heath, the chief legal officer at RCL Foods, says the company has deployed biosecurity measures, including a complete lock-down at its farms, and measures against wild bird infiltration.

There is no certainty that the measures will be adequate, although it is already clear that earlier bans on South African chicken by our neighbour ing countries will affect the sector negatively.