Naspers ‘will not buy back shares’

• Growth is targeted over short-term returns, CEO says

Naspers CEO Bob van Dijk says the internet holding company does not plan to buy back its own shares, which are trading at a significant discount to its stake in Tencent.

Naspers does not plan to buy back its own shares, which are trading at a significant discount to its stake in Tencent, CEO of the internet holding company Bob van Dijk says.

While some investors have called on Naspers to buy back its stock, Van Dijk said that the company would be “missing out on great opportunities”.

“We’re a cash-consuming company … and we have lots of opportunities that we’re putting cash against, and if you now decide to use your money to buy back shares, you’ll see a temporary increase in your share price and people will take short-term profit — and then what?

“A lot of the discount has been driven by structural factors that have very little to do with what we’re doing as a company, so to now throw away the future growth to satisfy short-term returns, we just don’t want to do that,” he said. Naspers would also not unbundle its Tencent investment, as “we are tremendous believers in the further potential” of the Chinese internet giant, and the move would yield short-term profit only.

Tencent has fast become the world’s fifth-largest company. Thanks to its 34% stake in the firm, Naspers has become Africa’s biggest.

Naspers said last week its interim group trading profit increased 40% to $2.1bn thanks to “a healthy boost from Tencent” and also its maturing ecommerce businesses.

Were it not for further investments in its e-commerce operations, the division would probably have turned profitable “relatively soon”, Van Dijk said. Naspers would continue to invest in its classifieds, online payments and food delivery operations, with a bias towards emerging markets.

This would be funded with Tencent dividends, cash from its profitable e-commerce and video entertainment businesses and the proceeds of disposals.

The company had a separate war chest for acquisitions, including a $2.5bn unutilised revolving credit facility.

Naspers would “experiment” through its ventures arm.

Naspers Ventures evaluated 300-400 companies a year and invested in five to 10 firms annually. “In the past two years they have invested in aggregate less than $200m.

But they’re young companies so we catch them early and they have the potential to be really big.” But Van Dijk conceded that finding another Tencent was unlikely. “We’ve … been looking around the world to see if there has been any internet investment

THEY’RE YOUNG COMPANIES SO WE CATCH THEM EARLY AND THEY HAVE THE POTENTIAL TO BE REALLY BIG

… that was a better investment than Tencent, and I don’t think there was, so looking for another Tencent is like looking for a needle in a haystack. “We form a view on which business models we think can be really big, and we try to find the right entrepreneurs to run with them, so we’re looking for a similar opportunity…. Whether it will be as big as Tencent, that’s unlikely, but I think you can have a fantastic investment without being exactly Tencent.”

Naspers was “very excited” about companies that use technology in education, partly because education has not become cheaper in real terms in recent decades, while other goods and services have.

“There will be a few companies that will make a tremendous difference in [transforming education] and we are looking for those companies.”