Naspers, dar­ling of the JSE

The Star Early Edition - - OPINION & ANALYSIS - Amelia Mor­gen­rood

NASPERS has be­come the most im­por­tant and most talked about share on the JSE, and it now rep­re­sent more than 15 per­cent of the All Share In­dex. The share price per­for­mance was re­mark­able, to say the least. 1 year – 15 per­cent; 3 years – 90 per­cent; 5 years – 472 per­cent; 10 years – 1 316 per­cent.

Naspers have played a sig­nif­i­cant role in the per­for­mance of share port­fo­lios and unit trust in SA and it has created enor­mous wealth.

Last week Naspers re­ported full year rev­enue of$6.10 bil­lion (R79.62bn) (pre­vi­ous year $5.93bn) and pre-tax prof­its surged to $3.05bn from $1.26bn posted last year.

These num­bers are mind-blowing, and it is all thanks to their stake in Chi­nese tech­nol­ogy com­pany Ten­cent, but Naspers is busy on many fronts all over the world.

In Jan­uary the group con­cluded the merger of its on­line travel busi­nesses ibibo and redBus with Nas­daq-listed MakeMyTrip, cre­at­ing In­dia’s lead­ing on­line travel busi­ness. Naspers now holds a 40 per­cent stake in MakeMyTrip.

In May Naspers an­nounced an in­vest­ment of €387 million (R5.77bn) for a mi­nor­ity stake in Germany-based De­liv­ery Hero pro­cessed 171 million or­ders in 2016, up 65 per­cent from the pre­vi­ous year, po­si­tion­ing it as the lead­ing on­line food and de­liv­ery mar­ket place in most of the more than 40 coun­tries in which it op­er­ates. It is the largest food net­work in the world with more than 150 000 restau­rant part­ners.

The losses at OLX nar­rowed sharply this last year and mon­etis­tion rates im­proved, which could re­sult in rev­enue ac­cel­er­a­tion. OLX is close to break-even and could be a key cat­a­lyst for Naspers go­ing for­ward.

Fur­ther ac­qui­si­tions

The Naspers man­age­ment team have clearly com­mu­ni­cated a will­ing­ness to con­clude fur­ther ac­qui­si­tions and the mar­kets ner­vously await their next move. A lot de­pend on man­age­ment to di­ver­sify the com­pany to not be only de­pen­dent on Ten­cent, and fu­ture ac­qui­si­tions can change the na­ture of the com­pany.

In­vestors are wor­ried about the high val­u­a­tion level of Naspers and are scared to buy at the cur­rent level of R2 545 per share. If you con­sider buy­ing Naspers you should (for the mo­ment) mostly take a view on Ten­cent. This fast grow­ing Chi­nese tech­nol­ogy com­pany is now the 10th big­gest com­pany in the world and will prob­a­bly be the world’s largest busi­ness within the next 5 years.

Ten­cent is def­i­nitely not done grow­ing, and owns the most valu­able thing in the world – peo­ple’s time. It serves hun­dreds of mil­lions of users in China and Ten­cent does this through an app called WeChat.

WeChat is like your 10 most-used apps crammed into one. You can do ev­ery­thing with­out ever leav­ing WeChat, which in­cludes pay­ing for just about any­thing.

About 50 per­cent of WeChat users are on the app for 90 min­utes or more per day. Mo­bile phones are the main source of en­ter­tain­ment in China and this is where peo­ple spend most of their time.

Ten­cent dom­i­nates China’s so­cial net­works and its reach is far spread; it is also the world’s leader in elec­tronic gam­ing, based on sales. And gam­ing con­tin­ues to be the com­pany’s largest growth engine.

In gen­eral China is start­ing to look more at­trac­tive due to its re­cent eco­nomic growth suc­cesses and their abil­ity to trans­form with lit­tle ef­fort into a coun­try that fo­cuses on ser­vices, and not on in­fra­struc­ture. The Chi­nese stock mar­ket has been un­der pres­sure for years, but it is now be­com­ing clear that their econ­omy is par­tic­u­larly strong.

Amelia Mor­gen­rood – BCom (Hons) Fi­nan­cial Plan­ning, Mem­ber of the South African In­sti­tute of Stock­bro­kers. Faerie Glen Stock­broking & Fi­nan­cial Plan­ning.

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