Tencent FY and 4Q numbers - Still showing strong growth

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.

Here is a look at the TenCent results, from their release: TenCent announces 2015 fourth quarter and annual results. Revenues increased 30 percent. Yip, China must be finished that the revenue base of this company has grown to 15.8 billion Dollars. Operating margins were the same as last year, 39 percent, operating profits increased 33 percent year-on-year to 6.256 billion Dollars.

Non GAAP diluted earnings per share clocked 3.437 Renminbi. Which translated to Hong Kong Dollars equals 4.12 Hong Kong Dollars. Which means that the stock, currently at 157.4 Dollars trades on a multiple of 38.2 times. Put differently, with earnings growth of 16 percent, that means that the PEG ratio for this stock is still above 2 times. That is Price to earnings divided by growth in earnings. Expensive, still growing sharply however, and perhaps Mr. Market in Hong Kong has got it right.

Methinks that us Joburgers down here have it completely wrong. And whomever is buying Naspers currently. Whilst there is no such thing in life as a free lunch (somebody ALWAYS has to pay), the sum of parts calculation always reveals that the other huge businesses that Naspers owns and is developing are valued at basically nothing. I guess the market is saying that there is execution risk, the cash cow satellite TV business is going to face competition in the same way that Amazon and Netflix (and co) present dangers to traditional cable guys. Surely not nothing though?

Multiply Naspers' stake in TenCent (33.85 percent) by the current market cap of TenCent (1.47 trillion Hong Kong Dollars) and then convert it back to Rands, you get to roughly 980 billion Rand. Naspers closed last evening with a market cap of 920 billion Rand. granted the business separately must be valued at face value, they have other serious loss making ecommerce businesses that they are developing, those are not without their risks, equally Naspers are incuring debt in building those businesses. It just always looks like a fabulous opportunity, we continue to accumulate Naspers, and of course watch Tencent really closely!