Here’s what the WSJ thinks of Naspers – The Wall Street Journal

DUBLIN — Naspers attracted global attention earlier this year when it sold down a chunk of its Tencent stake, building itself a huge, $10 billion war chest. Since then, Naspers has been doing what it promised – making a series of strategic investments in the three businesses it's hanging its future hat on: online classifieds, food delivery, and digital payments. While some have lauded the company's strategy, others have criticised it, saying that they would rather see the cash earned from the successful Tencent bet being returned to shareholders. The question, basically, is whether or not Naspers can make the cash work better for shareholders, with its strategic bets, than they could do for themselves, with their own investments. The jury is obviously still out, as Naspers is in the early days of its new investment push. Whatever happens, shareholders must be eager to see some reward to make up for the discount that the company trades at. – Felicity Duncan.The African Media Giant That Wants to Create the New Craigslist.JOHANNESBURG — Naspers Ltd., the little-known South African media outlet that grew into the continent's largest company thanks to a phenomenal bet on Chinese internet giant Tencent Holdings Ltd., is trying to remake itself again with a counterintuitive punt on the future of publishing: classified ads..The conglomerate kicked off a new chapter in March when it sold down its stake in Tencent to 31.2% from 33.2%, giving it a $9.8 billion war chest. The company's strategy is to bet the cash on some not-so-sexy categories, such as online classifieds, payments and food delivery..___STEADY_PAYWALL___.Removing cash from Tencent, one of the world's largest companies with a market capitalisation of about $350 billion and whose shares have gained about 40% annually over the past 10 years, is a bold bet by Naspers on the potential of its e-commerce businesses..Naspers has classifieds businesses in some 40 markets from Russia to Brazil to the US, where the company is going up against Craigslist Inc. with a mobile-classifieds app called letgo..Last month, it said it would separately list its video entertainment business to unlock value for shareholders and focus more acutely on its e-commerce businesses, which include online classifieds..The online classifieds market is worth about $24 billion globally and has expanded 50% in five years, according to estimates from management consulting firm McKinsey & Co. Growth is being fuelled by the coalescence across the developing world of surging internet and smartphone usage and a rising urban population, leaving people with less room to store excess belongings..The key to success in the online classifieds business is boosting brand recognition and user bases as quickly as possible, analysts say, which requires big spending on marketing—and sometimes acquisitions. Naspers' Tencent windfall gives it an advantage over competitors, analysts say.."There's enough of a beaten path toward monetisation. It's one of the most successful parts of what Naspers is doing," said Ken Rumph, an analyst at Jefferies Group LLC in London, of the strategy. "[But] there's a sort of wider question: 'Couldn't you have given some of that back [to shareholders]?'".Naspers is hoping the new chapter can help it shed market perceptions that it is a one-trick pony. The company is valued at $85.3 billion, a more than 20% discount to its $110.6 billion Tencent stake. Naspers' market value has decreased 19% this year, largely because of a 28% plunge in Tencent shares, according to analysts..Naspers' strategy will see it compete against Craigslist in the US market through letgo. Craigslist didn't respond to a request for comment..In August, Naspers said it would invest $500 million of new capital into letgo, which includes a feature that allows users to point their smartphone camera at items to see what they own is worth and how high demand is for similar items. The company is betting that letgo's user-friendly interface will help it cut into closely held Craigslist, the market leader.."Classifieds work particularly well if people have lots of goods they don't need and access to the internet," said Martin Scheepbouwer, chief executive of Naspers' classifieds business, OLX Group. "In the US, the amount of stuff people have for sale is enormous.".Founded in 1915, Naspers has successfully shape-shifted before. The company produced publications that became propagandists for the National Party, which came to power in 1948 and instituted the apartheid system of racial segregation..When apartheid came under mounting international pressure in the 1980s, Naspers began expanding beyond its publishing roots. In 2001, the company made a $34 million bet on Tencent, helping to transform Naspers into a media and internet giant. Naspers has investments in about 50 brands that operate in more than 120 countries..Naspers executives hope their bets on categories like classifieds, which were once the bedrock of revenue for newspapers around the globe, will lead the company into its next incarnation.."There's no other business that makes such high margins," said Philip Short, an analyst at Old Mutual Equities, referring to Ebitda margins—earnings before interest, taxes, depreciation and amortisation as a percentage of total revenue—of over 50% that online classifieds companies can make..Naspers' classifieds segment was profitable last year for the first time, excluding letgo, where it has invested heavily, and Mr Scheepbouwer expects the business to be profitable inclusive of letgo this fiscal year, which ends March 31, driven by big profit in Eastern Europe, Russia and Brazil.."Naspers has been very aggressive and comfortable to invest more funds behind opportunities like letgo," Mr Scheepbouwer said. "Take India, it's one of our largest markets in potential, but people don't have much stuff to sell in general [and] relatively clunky phones in areas of poor reception.".But with India's population of about 1.34 billion, it is a market that Naspers is happy to tread water in for now. "We're very comfortable…We're here to stay in classifieds, and that means we're not afraid to put money behind big opportunities," Mr Scheepbouwer said..Write to Alexandra Wexler at alexandra.wexler@wsj.com

Here’s what the WSJ thinks of Naspers – The Wall Street Journal

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