Naspers shares down 15% in a week

Saturday Star - - P E R S O N A L - MARTIN HESSE |

IN­VESTORS in JSE dar­ling Naspers, which in­clude many unit trust fund man­agers, in­dex-track­ing ex­change traded funds and re­tire­ment funds, had a rude shock this week when the share dropped to R2 525 on Thurs­day morn­ing. This was down 15% (from R2 970) within a week and down 33% from its price of R3 750 in Jan­uary this year.

Naspers’s ma­jor hold­ing is Ten­cent, the Chi­nese so­cial me­dia and on­line gam­ing gi­ant, and one of the world’s largest com­pa­nies. The drop in the Naspers share price has mir­rored a sim­i­lar drop in the Ten­cent share, which has tum­bled nearly 40% since Jan­uary.

While the cur­rent lack of con­fi­dence in Ten­cent may cause the share to drop fur­ther in the short term, Fran­cois Stry­dom, port­fo­lio man­ager at Mo­men­tum Se­cu­ri­ties, be­lieves Ten­cent is fun­da­men­tally a good long-term buy.

He says Chi­nese reg­u­la­tory con­cerns about Ten­cent’s on­line gam­ing seg­ment have been cited as a large con­tribut­ing fac­tor to the share-price de­cline, “although the gam­ing seg­ment ac­counted for only 34% of rev­enue as stated in its re­cent quar­terly re­sults”.

Stry­dom says the share is trad­ing at five-year lows on a one-year for­ward earn­ings mul­ti­ple, mean­ing that de­spite the down­grades in earn­ings ex­pec­ta­tions for the next two years, the share price drop is now pro­vid­ing a cheaper en­try point than has been seen in the past five years.

And he says Ten­cent’s man­age­ment is show­ing ini­tia­tive in fo­cus­ing on the group’s ma­jor growth ar­eas and re­main­ing rel­e­vant in the dig­i­tal age of cloud com­put­ing and ar­ti­fi­cial in­tel­li­gence (AI).

“At the begin­ning of the month, Ma Hu­ateng, the chair­man of Ten­cent Hold­ings, an­nounced an ini­tia­tive to con­sol­i­date its mo­bile in­ter­net (Ten­cent browser), on­line me­dia (video and news), and so­cial me­dia (QQ, Wechat) busi­nesses into one seg­ment, ef­fec­tively con­sol­i­dat­ing its en­tire so­cial me­dia and in­ter­net con­tent of­fer­ing into one easy-to-man­age seg­ment. So­cial net­work rev­enue alone grew 30% year-on-year in the last quar­ter.

“Some of the re­main­ing busi­ness will also be cut and diced to al­low a clear fo­cus for Ten­cent’s Cloud and AI of­fer­ing.

“Fi­nally, the ad­ver­tis­ing sales de­part­ment across the group will be com­bined to pro­vide a bet­ter model for ad­ver­tis­ers go­ing for­ward. Ad­ver­tis­ing rev­enue grew 39% yearon-year in the last quar­ter.

“This re­struc­ture should pro­vide fo­cus across the group and en­sure that Ten­cent re­mains rel­e­vant in the ever-evolv­ing in­ter­net era,” Stry­dom says.

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