Naspers, darling of the JSE
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.
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.