Bear in charge, weak trend worsens
Market players plead with Naspers to unlock value.
the internal weakening that the JSE is currently experiencing is worsening with just 28% of the top 100 shares, as measured by their market capitalisations, being above their 200-day exponential moving averages (EMAs) at the end of June. This compares to 38% early last month and 50% in the preceding two months. The weakening trend is confirmed by the 200-day EMAs of the Top40 Index as well as the All Share Index, which have turned south.
Those shares that lie above their EMAs evoke little enthusiasm as Capitec, the best performer, is just 16% above its EMA, followed by Clicks (11%) and Bidcorp (10%). Last month’s strongest share, Naspers*, lost steam after reaching new highs. There are many demands that the group unlock value through corporate action, especially with regard to its major investment in Tencent. Commentators want it to separate its interest of close on 34% in the highly successful Chinese group from its other investments. Its shares are trading at a lower level than only its interest in Tencent. All its other interests (it operates in 130 countries) are therefore ignored in its share price.
Tencent is a major company in China and should Naspers take steps to change its current relationship, which is based on an intricate structure, it could lead to questions being raised by the authorities. A Swiss fund manager, Albert Saporta, says in an open letter to Naspers CEO Bob van Dijk that millions in value for shareholders are being destroyed. Cy Jacobs of 36ONE Asset Management suggests that value will be unlocked should Tencent buy out Naspers’s interest. He mentions a figure of R3 400/share, which represents a healthy premium at Naspers’s market price of R2 513 at the time of writing on 4 July.
Naspers has thus far shunned demands that it should consider steps to unlock value. Investors have in any case enjoyed a fantastic return over the years – R100 000 invested in Naspers shares in 2000 is currently worth R2.7m, excluding dividends. That the group is still heavily invested in technology and e-media is evident from the fact that this year alone it will spend an estimated $600m (R7.9bn). In all the analyses of the company it has been mentioned that there is still enormous potential for the group in these areas. In China alone, there are 731m internet users. No analyst sees Naspers as a sell, but 16 do see it as a buy.
Among the weakest shares, Sibanye stands out. It’s lying no less than 52% under its long-term EMA, although it may be pointed out that there are investors who hold out acceptable prospects for it given the oversubscription of its large rights issue to help pay for the purchase of platinum and palladium group Stillwater Mining in the US. The share has dropped by almost 80% since reaching its high of 7 248c in August last year. It’s noteworthy that John Biccard of Investec, one of the well-known managers of value unit trusts, has purchased large tranches of the share in the quarter to end March.
As to be expected during a weak market, little is happening among the shares that have broken through. What is interesting is that companies such as Sappi, Nampak, Barloworld and AVI are experiencing resistance around their 200-day EMAs. These shares are apparently accumulated by strong buyers at this level. ■