6 Month Interim

Another day, another set of Naspers news, this time it had to do directly with earnings. This was a trading update for the six months to end September, the first half of Naspers' financial year. Earlier in the day the stock had seen a serious leg up on the news that they were entering into JV's with separate businesses around the developed world to pursue classifieds. I am not too sure about you personally, it is not something that I spend a lot of time doing, looking at classifieds. I suspect that the classifieds of yesteryear and the classifieds of today are browsed in a very different manner.

I am not too sure why the Naspers share price should have rocketed up so much on the classifieds news, if you missed our write up on Friday, here goes, a quick refresher: Naspers is classified. Classified indeed. Byron will get that!! Lots all happening, the stock soared nearly 9 percent on a down day, reaching an all time high of 1603 and some change during the course of the morning.

Perhaps, as we discussed in the office that some folks are starting to concede that the sum of the parts is and should be worth more than it is currently. As Naspers effectively is a proxy for Tencent, along with all their other businesses (including these new ones), surely we should not as South African investors second guess Chinese investors valuations of Tencent? It seems as if we apply a discount to the Hong Kong valuation, the stock (Tencent) trades on a multiple forward of 30, which is expensive by most measures, not too much when the company is growing earnings in the region of 40 percent. In fact, if the Tencent share price "went nowhere" for a couple of years, the share price would probably only then look attractive to many naysayers.

I think that there is a level of arrogance in applying a discount to Tencent from the local asset management community. That is a story for another day, often the ghosts of expensive stocks past come back to haunt you, calling something lower to a level that you think is acceptable discounts what the collective market thinks. So here is the Trading Statement:

We expect core headline earnings per share to be between 18% (1 473 cents) and 24% (1 548 cents) higher than the comparable period's 1 248 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.

And then the trading update continues:

It is expected that earnings per share for the six months to 30 September 2014 will be between 180% (2 209 cents) and 190% (2 288 cents) higher compared to the prior period's 789 cents, mainly as a consequence of gains recognised by our associates on the sale and re-measurement to fair value of investments. These gains have been excluded from both core headline earnings and headline earnings per share. Headline earnings per share for the period are expected to be between 18% (1 089 cents) and 24% (1 144 cents) higher than the prior period's 923 cents.

These results will be out on the 25th of November, next week Tuesday. No doubt they will be exciting, they always are. Seeing as Tencent, the share price has barely budged (OK, up a little since their results last week Wednesday), the classifieds deals are the ones that have gotten people very excited, the realisation that there are all sorts of other businesses here, more especially the satellite TV business. On our market BHP Billiton has been eclipsed by Naspers, that does however not take into account the two separate share registers that BHP Billiton have. Naspers however has a market cap of 648 billion Rand, and whilst the three companies ahead of them (BAT, SABMiller and Glencore) have their primary listing elsewhere, Naspers have their primary listing here in Johannesburg. Wow, a grand success story.