Run­ning out of steam

Finweek English Edition - - MARKETPLACE - edi­to­rial@fin­week.co.za By Mox­ima Gama

Naspers* is un­doubt­edly one of the dar­lings of the in­vest­ment world, and those who’ve had the fore­sight and pa­tience to sit with this in­vest­ment have ac­cu­mu­lated a lot of wealth over the years. While the share price has been rel­a­tively flat over the past year, it has gained nearly six­fold over the past five years, driven largely by its 34% hold­ing in Chi­nese in­ter­net gi­ant Ten­cent, owner of WeChat.

On 25 Novem­ber, Naspers re­ported a 16% in­crease in rev­enue to $6.8bn in the six months to end Septem­ber, while trad­ing profit was up 21% to $1.47bn. How­ever, its video en­ter­tain­ment as­sets, which in­clude Mul­ti­Choice, have come un­der pres­sure as weak­en­ing cur­ren­cies against the dol­lar in a num­ber of its African mar­kets weighed on mar­gins. This, cou­pled with in­vest­ment in ShowMax, its video-on-de­mand plat­form that was launched in Au­gust 2015 and com­petes with the likes of Net­flix, led to trad­ing profit falling by a third to $331m in the pe­riod.

With the aim of fo­cus­ing on e-com­merce go­ing for­ward, the com­pany also plans to ex­pand in ed­u­ca­tion soft­ware in Africa through Udemy and Brainly – US ed­u­ca­tion tech­nol­ogy com­pa­nies. Although Naspers will seek fur­ther promis­ing in­vest­ments within the in­ter­net seg­ment – it is plac­ing a large fo­cus on ed­u­ca­tion tech­nol­ogy busi­nesses in par­tic­u­lar – and has shown im­proved prof­itabil­ity in its e-com­merce operations, the share price is re­veal­ing fa­tigued up­ward im­pe­tus. Are in­vestors now find­ing the share price too ex­pen­sive, with con­cerns about the out­look for Ten­cent (par­tic­u­larly if spec­u­la­tion is true that Face­book is look­ing at ways to re-en­ter the Chi­nese mar­ket) and ShowMax? How to trade it: Cur­rently tee­ter­ing on a key sup­port level at 203 820c/share, breach­ing that level could see Naspers retest sup­port at 188 300c/share. Below that level, an ag­gres­sive short would be rec­om­mended as Naspers could ca­pit­u­late to 168 500c/share. Next sup­port would be at 152 195c/share. How­ever, if the 203 820c/share sup­port level holds, Naspers could trade through 219 750c/share and re­cover its losses to­wards its 255 360c/share all-time high. In this case, re­frain from go­ing short below 203 820c/share.

*fin­week is a pub­li­ca­tion of Me­dia24, a sub­sidiary of Naspers.

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