With all of the news flow around the performance of Tencent in driving the share price of Naspers, there is a tendency to forget
about the role played by other parts of the Naspers business. Indeed, in recent times, it appears as if these have been more
significant drivers of share price performance than Tencent.
To recap:
• Naspers’ share price has risen from R258 to R335 since we presented in early-July (+30% or so).
• Over the same time period, Tencent’s share price has risen from HK$130/share to HK$168 (+30%), but when converted
into ZAR it is only up 17%.
• Based on the above, if one strips out Naspers’ 35% holding in Tencent at full value from both measurement periods, the
remaining Naspers market cap has risen by 34% over the same time period, or an increase of ~R11bn. Tencent
accounts for around 70% of Naspers market cap before applying any holding company discount (we think a 15%
discount is appropriate).
Recently there have been some news reports that DST (the Russian Internet company) is looking to re brand as Mail.Ru Group
and list on the LSE this year with media reports citing a listing value range of $5bn-6bn. As a reminder, earlier this year Naspers
swapped its 39.3% stake in Mail.Ru plus a cash injection of $338m for a 28.7% stake in the enlarged DST (to be renamed Mail.Ru
Group) business – this is the entity it is looking to list. In F2010, Naspers’ 39.3% stake in Mail.Ru accounted for R70m of associate
earnings – so even if we put a 50x PE on this number, most analysts probably wouldn’t have come up with a value of more than
$850m for Naspers’ 28.7% share of DST ( equal to $338m + [50x R70m / 6.85]). The talk around this listing is that this same asset
will now be worth as much as $1.7bn (ie 28.7% of $6bn)!
The point of all of this is that the hype around this listing could well have accounted for $850-1000m worth of “value” uplift for
Naspers over this period, or R5.5bn-R6bn. This would explain around 50% of the re-rating of the “non-Tencent” market cap over
this period.
Therefore the approach we have taken to valuing Naspers now is to give Naspers the benefit of the doubt and assume that
Mail.Ru Group will list at $6bn (100% of the group) and then apply a 15% holding company discount for Tencent’s 28.7% – much
as we have done for its holding in Tencent. Bear in mind of course that a value of $6bn will probably amount to a forward PE of 50-
60x.
Naspers valuation:
Rm Per share
35% of Tencent @ 15% discount: 79,678 R 208 (HK$168/share before discount)
28.7% of Mail.Ru Group @ 15% discount: 10,079 R 26 ($6bn listing value)
Remaining businesses at 15x P/E to March 2011: 52,710 R 137
Value of Naspers Group 142,467 R 371
Number of shares in issue (million) 383.8 % upside
Per share value of Naspers R 371 R 371 11%
On this basis we still don’t see huge upside in the stock, with a fair value of around R370
We will short NPN any were below 365 keeping a stop loss at 380 looking at a target price of 290.
We will also be looking at short trades for ALSI , SLM, SHP,TRU,IPL,CFR & ABL this week so don't forget to look at them as possibilities.
Have a good trading week.
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