Naspers passes R2000

At the start here Naspers have blown through 2000 Rand, as a result of TenCent having crested 170 Hong Kong Dollars for the first time. Perhaps it is time for a refresher in terms of the, what Naspers is worth question. Their results for the full year to end March were released in June of last year. If there is to be a trading update, there could be one at any time in-between now and then, looking back over the years and more especially at the interim phase, the trading statement was ten days before results. End of June says the investor relations calendar, 29 June to be precise.

Our trusty Naspers/Tencent calculator is as follows: Take the Tencent market cap in Hong Kong, which right now is 1.58 trillion HKD. Naspers owns 33.85 percent of TenCent, that translates to 534 billion Hong Kong Dollars. One Hong Kong Dollar at the current exchange rate is 1.56 Rand. So, quite simply, multiply 534 billion HKD by 1.56 and that equals 834.8 billion Rand. Naspers had a market capitalisation of 813 billion Rand at the open today, up 3.7 percent as I write this in early morning trade which equals 843 billion Rand. The difference between what the stake in Tencent is worth, relative to what the JSE buyers are willing to pay is roughly 8 billion Rand. Effectively, the South African asset management community is telling you that the people of Hong Kong, or the folks valuing Tencent on a 53 multiple are overpaying. With growth rates in the mid 30's, the PEG ratio is somewhere in the region of 1.43 times, which is starting to reach expensive levels.

I am reminded many times that a) the internet is still at early stages in China and there is plenty of room to grow rapidly, b) there is very little entertainment in China, that is why the Tencent platforms are so successful and c) the Chinese authorities like having control over the local companies that operate in that space, equally the companies there now will keep external competitors at bay. So whilst Tencent may be at the edge of what is "full" in terms of price, the rest of Naspers is effectively "free". This phenomenon of "getting the rest for free" with regards to the rest of the Naspers businesses has ALWAYS been around, somehow our wisdom amongst South African investors is arrogantly miles better than those folks closer to the action of the business who actually live in the region. Yes. Perhaps it is worthwhile to ask the investor relations person at Naspers this very question, and why she thinks it exists.

Remembering that last year the TV business at Naspers recorded revenues of 36.271 billion Rand and registered EBIDTA of 10.370 billion Rand. You could easily pay 150 billion Rand for that as a standalone business. And yet, I recall over a year ago Koos Bekker thought that the business was a "legacy" business. He is right, more and more content will be available online when the faster internet speeds become available in South Africa (sometime in 2030 - maybe, I am of course kidding), that is a threat to their very own business. Perhaps when the ecommerce businesses are fully fledged and making money (instead of losing A LOT), the TV business will be floated separately. Who knows, for now the cash cow is available for the heavy investments in the ecommerce businesses.