Research archive for NPN

It is Naspers time. It is more than a little complicated when trying to review this business, and that is why there has always been various views on why you should or shouldn't own the stock. At a face value the stock from an earnings point of view always looks overpriced. Not all valuation metrics are the same, you value the business based on the future profitability of the business. I suspect that many investors who try and value this business grapple like all of us to try and value what the likelihood of the increased investment in key areas is likely to yield. In other words, heavy investments currently in their classifieds and ecommerce businesses, mean steep losses for the time being. The longer dated investor may well think that this is very necessary for the business to jump to the next stage of investment.

Staying on the tech front, Tencent to Acquire Majority Stake in Supercell from SoftBank for U$D 8.6 billion. In total Tencent will own 84% of the company, valuing it at $10.2 billion. Pre-tax profits last year for Supercell were $960 million meaning Tencent paid a low double digit multiple for the company, time will tell if this was a good purchase. The huge risk here is that their current stable of games become old and they don't come up with new games to keep the user numbers and revenues up, currently there are over 100 million people a day who play supercell games.

The news came yesterday that Naspers had invested a 60 million Dollar stake in Udemy. Udemy describes themselves on their About Us sections as "We're the world's online learning marketplace, where 10 million+ students are taking courses in everything from programming to yoga to photography-and much, much more. Each of our 40,000+ courses is taught by an expert instructor, and every course is available on-demand, so students can learn at their own pace, on their own time, and on any device."

Tencent results yesterday! This was for their first quarter of 2016. Follow the link to download the .pdf. As you can see clearly, revenues rose 43 percent to 31.995 billion Renminbi, or 4.952 billion Dollars. Or in their listed environment, Hong Kong, in those Dollars that equals 37.95 billion Hong Kong Dollars. Or to really get a sense of how big this business would be in a South African context, that is revenues from Tencent (for the last quarter) of 77.75 billion Rand.

TenCent reported numbers yesterday, after the market had closed in Hong Kong. So we got the benefit of what people thought of them, translating that through to the Naspers share price. Remember that Naspers owns over one-third of the Chinese internet/entertainment business. They bought it for peanuts. If Koos Bekker does nothing else from here (which I am sure at 63 he won't, he still has lots to give), then the team that worked on that transaction hopefully had their boots stuffed full of Naspers stock options. Naspers stock here locally added 2.62 percent to close at exactly 2100 Rand a share. The all time high reached last November was 2270 Rand, we are still a way off that. This morning, TenCent stock in Hong Kong is up around three and a one-third of a percent, around 8 odd percent away from their all time highs. That was reached last April.

Naspers sold off sharply on Friday, the stock was down four and a half percent by the close. The first announcement regarding the capital raise was released on Thursday, you can find it here: Launch of an accelerated bookbuild of up to US$2.5bn, the second one was an announcement in no time at all, before the market opened on Friday.

Naspers, one of our most widely and largest holdings across our client base reported their half year numbers on Friday afternoon at 4. Forget Thanksgiving and the half day in the US, forget that we are in festive season, at least for the office and school segment, this is Naspers time. If you were not there to see it, you missed out. Revenues for the half increased 24 percent to 74.29 billion Rand, trading profits increased 34 percent for the half, the metrics at face value look amazing. Core HEPS increased by 40 percent to 21.33 Rand, up from 15.28 Rand this time last year. Revenues have now grown at a compounded annual growth rate of 33 percent for the last four full financial years, it is pretty astonishing. Where are the revenues coming from? Here goes, a series of graphics from the investor presentation all through from segment, geography and then a further breakdown of revenues by type of activity.

Naspers released a trading statement this morning. Seeing as the company is always pretty hard to value as a function of the outlandish sized (in Rand terms) position in Tencent (They own 33.85 percent of the Chinese internet/entertainment company), the numbers sometimes don't represent the full picture. Here goes, anyhow, the trading update this morning: "We expect core headline earnings per share to be between 37% (2 093 cents) and 42% (2 170 cents) higher than the comparable period's 1 528 cents. Shareholders are reminded that the board considers core headline earnings an appropriate indicator of the sustainable operating performance of the group, as it adjusts for non-recurring and non-operational items."

Tencent reported numbers yesterday. So what, why should we care? Well, last I checked, the Naspers ownership of Tencent was 33.85 percent. Which is a lot, to own of any company. Under the guidance of Koos Bekker, the company got involved in the early stages of Tencent's development. Naspers actually turned 100 years old this year, it is a far cry from the company that it once was, with the legacy print businesses a thing of the past. They really are, what the attraction is? I can't seem to see it, when last did you see anyone under the age of 25 reading anything other than on their mobile phone? Yip, me neither, and those are the consumers of tomorrow.

Naspers announced on Friday that they had stepped up their investment in Avito. What is that? As per the release, it explains that the business is the leading online classifieds business in Russia, and that they (Naspers) are increasing their stake from 17.4 percent to a controlling stake of 67.9 percent. The price seems pretty hefty, it is not clear what the purchase price is, how do you interpret this: "a US$1.2bn transaction to become the largest shareholder in Avito"?

Tencent released numbers yesterday, after the market closed in Hong Kong. And that was during our market. First of all, why does this matter to us? Naspers owns 33.85 percent of Tencent, it is their principal asset in size and scale, and has been for a long time their share price driver. Time to whip out the maths to see how many Rands Tencent is relative to the Naspers market capitalisation.

On Monday evening we received results for the year ending 31 March from our preferred technology stock, Naspers. And what an incredible business this is, with moving parts all over the world in what we believe are the right sectors. The report splits the business into 3 segments, Internet, Video and Print. If you are interested in this company I strongly suggest you read the results titled Naspers Provisional Report.

Naspers released a trading update as the market gong rang. I mean, as the electronic bell rang. The last trade in the spot market crossed the ticker, that sort of thing. We do not have a closing bell in the literal sense, the time just gives up the ghost on the spot market. Here goes the trading statement, which can be found on the SENS link on the Naspers website:

Thanks to the guys at Just One Lap for making this very interesting infographic comparing Tencent (Naspers) and Facebook - Infographic: Facebook vs. Tencent. The big difference between the two companies is that Facebook makes most of its money through advertising and they have more eye balls actively looking at their screens. Different business models but it still gives perspective.

Remember yesterday when we were suggesting that the rest of Naspers was essentially for free? You were getting it for nothing? Flipkart stocking up on $550 million in fresh funds at $16 billion valuation. What has that got to do with Naspers? As you can see; a) Naspers is an investor here and b) as per the Naspers website Flipkart, Naspers owns 18.6 percent. If they maintain their investment stake in this round of funding, it is worth 35 billion Rand to Naspers. Makes you think.