Narrowing the Tencent value gap: Naspers targets reducing exposure on JSE

JOHANNESBURG — The market liked Friday’s news coming out of the Naspers’ AGM about the company seeking to reduce its exposure on the JSE. On Monday morning, Naspers’ share was already up over 1.3%. The value discount has become a growing issue for the company which is by far the largest by market value on the JSE. It will be interesting, though, to watch how this process will play out over time, but, so far at least, the market is happy. – Gareth van Zyl

By Loni Prinsloo

(Bloomberg) – Naspers Ltd. is working to reduce its exposure to Johannesburg’s stock exchange as Africa’s largest company seeks to narrow its valuation gap with flagship asset Tencent Holdings Ltd.

The media and internet company owns about 31 percent of Chinese technology giant Tencent, yet the market values the stake at some $25 billion more than Naspers as a whole. Reducing the deficit has long been a priority for executives as they scour the globe for new online investment opportunities and work to turn more of its businesses profitable.

Koos Bekker, Chairman of Naspers Ltd, pauses during an interview at his office in Cape Town. Photographer: Halden Krog/Bloomberg

“The problem is we are too large for the JSE,” Chairman Koos Bekker said at Friday’s annual meeting in Cape Town. Naspers is almost four times the size of the second-largest South Africa-based firm on the FTSE/JSE Africa All-Share Index, meaning some money managers are forced to sell the company to keep their funds’ exposure below a minimum threshold, he said.

Naspers Chief Executive Officer Bob Van Dijk is working on how to reduce company’s exposure to the JSE, and said last month he’s looking at spinning off various parts of the company into different listings outside South Africa. Bekker added Friday that the process would have to be handled cautiously, as online businesses need scale to be able to grow. Naspers won’t end up being “10 little units,” he said.

Naspers spending spree

Naspers transformed from an Africa-focused media and TV provider through the investment in Tencent, in which it put $32 million 17 years ago. The company has since added a string of early-stage technology companies around the world, including Russia’s Mail.Ru Group Ltd., Indian travel agency MakeMyTrip Ltd. and Brazilian price-comparison site Inc.

About $700 million has been spent on deals this year as the firm continues its acquisition spree, Chief Financial Officer Basil Sgourdos said later at the AGM. Notable exits include India’s Flipkart, which generated about $1.6 billion in profit as part of a deal with Wal-Mart Inc.

Naspers stock has gained 1.4 percent this year, including the biggest plunge in a decade earlier this month when Tencent posted earnings that missed analyst estimates.

Van Dijk was paid about $2.5 million for the year through March, not including $9.6 million worth of longer term incentives, according to the 2018 annual report. The pay is based on that of other global technology giants and much of the incentives are in shares, said Craig Enenstein, head of the remuneration committee.

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