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In this interview with Naspers CEO and CFO Bob van Dijk and Basil Sgourdos, BizNews founder Alec Hogg poses the tough questions surrounding the deep discount inherent in the Naspers and Prosus share price as well as the issues surrounding excreting this value. All South Africans have a vested interest in Naspers management closing the discount to the underlying value of Tencent, given its substantial weighting on the local bourse. – Justin Rowe-Roberts
Bob van Dijk on Tencent:
We are convinced that Tencent is one of the very best growth enterprises in any industry in the world and that it has a lot of growth ahead. So the first thing to say is that we remain fully committed to owning a stake in Tencent for the long-term and reducing our stake should really not be interpreted as a reflection of our expectation around the future prospects of Tencent. In fact, we have no intention to sell any further Tencent shares for at least three years because we believe that it will continue to deliver an outstanding performance and it will be a source of excellence creation for our shareholders for the long term. And the reason for the sale is really due to the significant opportunity we see to invest across our businesses to generate great returns.
On the fact that Naspers and Prosus share prices fell sharply following the announcement:
I don’t make it my business to second guess the market. If you look at the prices today of Naspers, they’re up again substantially. And there’s a fair amount of volatility in this world. A lot more sensible explanation was that typically after such a book-build the share price of the company where the shares are sold adjusts to the price at which the book-build was done, which in this case would have been HK$595. And I guess the pricing changes in Prosus and Naspers could have been anticipating that price change (in Tencent). Who knows, right. I think the suggestion there is I think a fairly naive one. And again, second guessing the market is not my business.
On the possible unbundling of Tencent:
That’s an interesting suggestion. The suggestion has been made to us as a group for 15 years on various occasions by various people. I think our investors are incredibly grateful that we never followed that advice in the past. I think that is where we stand today. The Chinese Internet market is by far the largest and by far the most innovative in the world. I would say that the value creation in internet technology has been spectacular in the last decade and I believe it will continue to be very significant going forward. China is the largest technology consumer market in the world and will therefore be the place where most of that revenue growth will happen. Tencent is an exceptionally well run company that is very well positioned in that market. So for a global internet company like ours to have substantial exposure to the best company in the most attractive market, is a very sensible thing that has proven for about 20 years to be an excellent thing for investors. And so unbundling, I think, is a suggestion that has typically proved to be a very poor one and we continue to think that going forward.
Basil Sgourdos on the timing of the sale, merely two weeks after the previous commitment period ended:
The timing was really driven by the opportunities we see ahead and the needs for capital, and it has nothing to do with the fact it’s expired and that we were planning this. Covid-19 has had a really transformational impact on technology across the board and particularly our business. Our top line growth is just under 50% for our e-commerce assets. And that continues at that sort of pace. We think a lot of these trends are here to stick. We have great positions and great markets of which we can build a broader ecosystem and broader play, and we see a number of opportunities. As intimated by the earlier questions, we have a healthy pipeline. So that’s what drives timing. It’s not really the fact that ‘let’s do it again’. Therefore, there really is no intention that the next three years we do this again. We have great businesses. I think in three years time these businesses will be much bigger in terms of top-line profits and cash flow. Our balance sheet will be stronger, we will continue to build on the leverage there. I think we’ll be in a good place.
Bob van Dijk on why the unbundling of Tencent would prejudice shareholders:
I think to the fact that we are very close to Tencent and have been for 20 years has been beneficial to us in finding out where innovation would happen, where value creation would happen. And the fact that we are very close to innovation in the internet in China, where I would say most of the innovation happens because it makes us absolutely more successful and a better operator and investor elsewhere in the world.
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