Naspers offers value, say analysts
THERE has been much debate about whether Naspers is overvalued or still a buy at existing price levels.
From being the JSE’s high-flyer from 2013 to 2015, Naspers’s share price appears to have stalled. It even retreated by 5% last year, the first time since 2011. So far this year, the share price is up 6%.
Share prices can move sideways – consolidating at a price with slight fluctuations – for a period, but eventually they either go up or down. Which way will Naspers go? Technical analysis does not paint a pretty picture. After trading at a priceearnings ratio of more than 100 last year, it has fallen to about 80.
This is still nearly four times the JSE’s all-share P:E of about 23.
Momentum SP Reid say Naspers has encountered resistance near its 200-day moving average, with a slightly negative bias developing.
This short-term structural deterioration argues for additional weakness to between R2 085 and R2 090 from its existing levels of around R2 141.
Naspers’s share price dipped below R2 000 in December, but has recovered. It still does not show much value, with a targeted R2 500 or even R3 000 becoming increasingly hard to reach.
The Chinese Tencent investment, of which Naspers owns 34%, remains the main driver of growth. The management is furiously trying to diversify, from classifieds and e-commerce to new ventures and mobile apps. These investments have driven up revenue, but profits are yet to be seen.
Many analysts, after doing the number-crunching, believe Naspers offers value. Naspers, with a market capitalisation of R930-billion, still trades at a more than 20% discount to its 34% interest in Tencent.
The number-crunching rests on a simple premise: Take the market cap of Tencent in dollars and translate it into rand. Divide it by Naspers’ interest and compare it to Naspers’ current market cap. — TMG