That is my TenCent's worth

What happened to Naspers shares? Well, like we tried to point out yesterday, the same things that have happened to LikedIn, Twitter, Facebook, even Google to a lesser extent. Naspers share price peaked near the ides of March (this year) at 1354 ZAR a share. Since then the traffic has been in the wrong direction, if of course you are long the stock. Last evening the share price closed at 1041 ZAR a share, down over 300 Rand from their highs. Forget for a second that over the last year the share price is up 87 percent plus, I can tell you that most people care about what has happened in the last three weeks. For one, the TenCent news has been negative, the results themselves were light of expectations. When a company is priced for growth, the problem is a miss is often met with aggressive selling across the board.


Coupled with the negative news from their home base, TenCent has been sold off as a result of concerns of the valuations of internet stocks. Yes, there are many that fall into the category that the companies share price movements in the broader "internet" sector are not too dissimilar to that of 2000, the tech bubble. I am not too sure that any two times in the market are worth comparing, back then Google was not even a household name. Most of the overvalued stocks, anything with a high multiple, early stage earnings (or none at all) have run into the sellers. And that is understandable, nervousness around what people know and remember (the tech bubble) leads to more caution, if people think that they recognise a pattern again. Humans are excellent at pattern recognition.


Let us use the trusty calculator to determine how much of the Naspers share price is made up of TenCent. First, take the TenCent market cap in Hong Kong, which closed at 948.93 billion Hong Kong Dollars. Naspers owns 34.5 percent of TenCent, that translates to 332.12 billion Hong Kong Dollars. Now one Hong Kong Dollar is equal to 1.35 Rands. So, quite simply, multiply 332.12 billion HKD by 1.35 and that equals 448.36 billion Rand. Naspers had a market cap last evening of 443 Billion Rand.


So effectively, all of us South Africans in our infinite and superior wisdom have decided that the people in Hong Kong are mad, and should not value TenCent on that crazy multiple. But the truth is that you get the rest of the business, the hugely cash generative DSTv business for free. Remember of course that the Russians, Crimea, the Ukraine and Mail.ru must be weighing to a certain extent. Mail.ru however has hardly moved, the share price that is. The gap between what our smarter South African investors afford Naspers relative to TenCent calculation has not changed much over time. So all the movements in Naspers can be attributed to the negative move of TenCent. But I think that you knew that already. As ever, in the short term whilst all these other ecommerce businesses are in ramp up mode, the Naspers share price will be joined at the hip to TenCent, so it almost entirely hinges on what you think in terms of the future of TenCent.