Mul­ti­ple choices ahead

Why is Naspers shed­ding Mul­ti­choice if it thinks so highly of its growth prospects — and what of its own fu­ture?

Financial Mail - - BETWEEN THE CHAINS - Marc Hasen­fuss

The mar­ket hardly gave Naspers a round of ap­plause for pro­pos­als to un­bun­dle and sep­a­rately list its video en­ter­tain­ment group Mul­ti­choice on the JSE. The tech con­glom­er­ate’s share price, at midday on Tues­day, was largely un­moved.

One sus­pects that a rous­ing ova­tion would be re­served only for when Naspers un­bun­dles its 31% stake in Chi­nese in­ter­net gi­ant Ten­cent — an event un­likely to tran­spire any time soon, or ever.

Tech­ni­cally, the move should be wel­comed as share­hold­ers now have a chance to un­lock value from part of Naspers’s so-called rump — out­side of the Ten­cent in­vest­ment — that has been slapped with a neg­a­tive val­u­a­tion by the mar­ket. But judg­ing from the ini­tial re­ac­tion, the mar­ket ap­pears to be in two minds. Some pun­ters hold that Naspers is hand­ing over an ex-growth en­ter­tain­ment di­nosaur to share­hold­ers; oth­ers ar­gue that in­vestors should ap­pre­ci­ate the group’s cash flow prow­ess and African ex­pan­sion op­por­tu­ni­ties.

The Mul­ti­choice list­ing — set for early next year — will be a size­able one, with Naspers ex­ec­u­tives al­ready rank­ing the off­shoot as a top 40 listed com­pany on the JSE.

But Naspers has be­come prac-



tically a proxy for its sig­nif­i­cant stake in Ten­cent — so the mar­ket over­looks the group’s sprawl­ing other in­ter­ests, which span e-com­merce, on­line clas­si­fieds, food de­liv­ery and me­dia.

Es­ti­mates put the mar­ket cap­i­tal­i­sa­tion range for Mul­ti­choice be­tween R90bn and R120bn, with group CEO Im­tiaz Pa­tel re­port­ing an­nual rev­enues of R47bn and a trad­ing profit of R6.1bn. Naspers CEO Bob van Dijk, per­haps sig­nif­i­cantly, would not be drawn on a val­u­a­tion range at a me­dia brief­ing on Tues­day.

While the sug­gested range would be note­wor­thy by JSE stan­dards, this in­ferred val­u­a­tion of Mul­ti­choice pales in com­par­i­son to Naspers’s R1.4-tril­lion mar­ket cap.

With the Mul­ti­choice story be­ing strongly punted, Van Dijk was asked why Naspers was shed­ding the busi­ness. He said Naspers had grown into an on­line con­sumer tech­nol­ogy busi­ness, and re­tain­ing a stake in Mul­ti­choice did not feed into that strat­egy.

Still, he ar­gued, Mul­ti­choice was “un­ap­pre­ci­ated” by the mar­ket within the over­all value of Naspers. “We want to show the mar­ket how at­trac­tive Mul­ti­choice is. It’s a top 10 global pay-tv com­pany, and the op­por­tu­nity for growth is there. It’s a very pos­i­tive story.”

While movie and se­ries con­tent is in­creas­ingly com­pet­i­tive, most ob­servers agree that Mul­ti­choice holds a con­sid­er­able ad­van­tage in its dom­i­nance in main­stream sports like soc­cer, rugby, cricket, golf, mo­tor rac­ing and ten­nis. This ad­van­tage is likely to hold for at least the medium term.

In ad­di­tion, be­ing cut off from the Naspers mother ship is likely to fo­cus the minds of Mul­ti­choice’s ex­ec­u­tive team on mar­ket­ing

Bob van Dijk: Naspers re­mains committed to SA

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