Johannesburg - Naspers shares rose 6.5% since Wednesday last week after solid results from Chinese subsidiary Tencent.
Tencent reported a revenue increase of 75% for the first quarter on Wednesday. Naspers shares were trading at R199.16 on Monday, up from R187 before the release of Tencent's results.
Tencent developed and maintains China's largest and most used internet service portal and is listed on the Hong Kong Stock Exchange with a market cap of 144bn Hong Kong dollars (R162bn). Naspers owns a 35% share in the company.
Said Paul Theron of asset management firm Vestact: "Nobody gives Naspers credit for its far-flung high-tech assets. This may be beginning to change, but people tend to focus on companies' SA-based cash flow and things we can relate to."
He said in the USA, listed media firms with assets like those of Naspers tend to get a higher valuation.
However, Theron said that while it was clever of Naspers to buy into media assets, the company has made some other mistakes.
"The fact is that these assets put it in higher risk, and there is also substantial debt to consider," he said. Theron added that some assets, for instance the group's holdings in Eastern European mobile assets, have yet to generate a substantial profit. Locally, Theron describes DStv as a "one-track pony" while newspapers assets are "just crap".
Print media feeling the pinch
"Those particular businesses are going down the shoot faster than you can shake a stick at them. South Africa was a bit isolated from the global declines that hit print media hard, but now even magazines are feeling the pressure," said Theron.
Coronation Fund Manager's Godwill Chahwahwa said the Tencent results were much stronger than the market expected. The company proved to be resilient because the business focuses on "small-ticket items in a big and fast-growing market", despite lower advertising revenue.
He said, however, that it remains to be seen how other internet companies in the Naspers portfolio have weathered the challenging economic climate.
Chahwahwa said Naspers has promising prospects in Africa too. "Naspers' pay-tv business has very attractive prospects going forward. The company has strengthened business by growing its subscriber base strongly in the first half of its 2009 financial year, both at home and in other parts of the continent.
"We expect this to continue, and that in the long term, Naspers will grow the profitability of this business by up-selling compact subscribers to the premium packages as well as introducing value-add products like PVR into the premium subscriber base."
He said that the failure of GTV showed that to be a player in the African market, one needs to offer more than football broadcasts.
"Given the under-penetrated African pay-tv market and ability for Multichoice to drive revenues out of its existing customer base in South Africa and Africa, coupled with an attractive internet strategy, we see significant value in this business."
- Fin24.com is part of Fin24, a Naspers subsidiary.
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