TILTING AT WINDMILLS

An obscure Swiss money manager has emerged from nowhere with some rather awkward questions for SA’S biggest company, Naspers

It has taken a Swiss investment adviser named Albert Saporta (56) to rudely interrupt Bob van Dijk’s charmed three-year honeymoon as CEO of SA’S largest company, Naspers. Over the past three years, Naspers’s stock has soared 104% — leagues above the 0.34% gain in the JSE all share in that time.

The only problem, as Saporta wrote in an open letter to Van Dijk last week, is that Naspers’s meteoric rise was entirely due to Koos Bekker’s smartest (or luckiest) investment — a 33% stake in the Hong Konglisted Tencent, which owns Chinese social media sensation Wechat. Over those three years, Tencent’s stock soared even faster than Naspers’s, growing 120%.

The result: the entire Naspers is valued today at $88bn (R1.14 trillion), while just its 33% of Tencent is worth $116bn (R1.5 trillion). This means, says Saporta, that the market places a negative R300bn value on the rest of Naspers’s business — including Multichoice, classified website OLX and Flipkart.

“In the past three years, R334bn of shareholder value has been destroyed,” says Saporta to Van Dijk. “This is particularly unacceptable [as] your own compensation system is based on a share option plan that rewards you for an increase in Naspers’s share price for which you are absolutely not responsible.”

So Saporta wants Van Dijk to “spin-off” or reduce Naspers’s stake in Tencent to unlock the discount.

Naspers was blindsided by this. Meloy Horn, Naspers’s head of investor relations, says: “We were unable to identify AIM&R [Saporta’s company] as a shareholder” and “have never heard from him before”.

Though Saporta, who was born in the French Riviera city of Nice, doesn’t have a large public profile in SA, he is apparently well-known in hedge fund circles.

His company AIM&R, registered in 1997 in Switzerland, has no website but was described in the UK Independent in 1998 as “one of the biggest Uk-based hedge funds”. His early career included stints at one of London’s first hedge funds, IFM, in the 1990s, and later at Merrill Lynch and UBS. Eurohedge magazine, in 2011, told the story of how Saporta had sold his trading research business to Dutch bank ABN Amro in 2006, after which he “decided to watch the financial crisis unfold from the beaches of Rio de Janeiro”. In 2011, he came out of early retirement.

Speaking to the Financial Mail, Saporta says even if he owned a single Naspers share, it wouldn’t change the facts he’s exposing. “You don’t have to be a big shareholder to force a resolution. If enough people see I’m right, things can change,” he says.

Naspers, predictably, doesn’t agree with the calculations, which Van Dijk says are “neither correct nor insightful”. But Horn admits Naspers realises “the market is not attributing full value to our core businesses at this stage”, as many are still in a development phase.

Once these businesses mature and begin making serious cash, she argues, “it will become difficult for the market to ignore and the discount should rectify”.

That’s debatable. But on some points, at least, Saporta is dead right. For one thing, the Naspers top brass certainly shouldn’t get bonuses based on the Naspers share price. “It’s intellectually dishonest,” says Saporta. “They can just come into the office, open the newspaper to see what the price of Tencent is and then go play golf. Whatever they do is irrelevant to the stock, which only moves based on Tencent.”

Saporta is also right that Naspers’s disclosure is shoddy, failing to reveal profits or losses at its various unlisted businesses. On this point, Horn says: “We have been gradually increasing disclosure on our unlisted assets as they grow in scale over time.”

But she is adamant that Naspers won’t be selling Tencent any time soon. “When Tencent listed in 2004 at HK$3.7, management received advice from some investors, bankers and media to cash-in shortly afterwards. Today Tencent is trading at HK$280,” she says.

And Tencent, which paid Naspers a chunky $247m dividend last year, still has momentum, as its revenue growth of 55% for the first quarter of 2017 attests.

But Saporta says if Naspers is hoping the value of its other unlisted companies grows enough to close the discount gap, it’s a big risk. “Of the dozens of companies [it has] invested in today, more than half will probably be worth zero in 10 years’ time,” he says

Still, he admits he doesn’t expect Naspers to do what he’s asking anytime soon. “I don’t think [it] will. Doing so would transform Naspers from the biggest company on the JSE to one of the smallest. But if enough shareholders put pressure on [it], maybe [it will] try to be a good corporate citizen.”

Of course, the possibility of investors demanding Tencent be unbundled was always likely, thanks to the Chinese company’s runaway success. Saporta says other shareholders have contacted him and are “very supportive”. It sounds rather ominous for Van Dijk.

[The Naspers top brass] can come into the office, open a newspaper to see the price of Tencent and then go play golf Albert Saporta