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Johannesburg - The 6% gain in media firm Naspers' share price in March was driven by Chinese online business Tencent, which on Wednesday posted a near doubling in annual profit.
Naspers has a 35% stake in Tencent, which developed and maintains China's largest and most used internet service portal. Tencent is listed on the Hong Kong Stock Exchange with a market capitalisation of Hong Kong $302bn, equal to R271bn.
Interestingly, it remains to be seen if Naspers can continue to rely on Tencent to drive its share price. This is because the Chinese firm has warned of flagging profit-making in the current financial year.
Tencent reported 85.4% in annual profit to 5.22m Renminbi and basic share earnings of 2.8m yuan, an 86% climb year-on-year. In March alone, Naspers' share price gained over 6% to R313 per share.
"Naspers is really being led by Tencent," said an analyst. "If you look at Tencent's share price, it has increased by 12% over the last month and Naspers' share price has moved more or less in line with that."
"Tencent is in a fantastic space at the moment," said Cadiz Asset Management analyst Rob Nagel. "The fortunes of Naspers are entwined with Tencent going forward."
Said Nagel: "Tencent makes up over 80% of Naspers' market capitalisation right now. As a result, any movement of Naspers shares is dictated by Tencent."
But Tencent has warned that future revenues may take a dip as it incurs costs both to protect market share and to expand.
"We will continue to increase our investments in research and development, technological infrastructure, people development and branding in the coming years," the firm said in a statement.
"In this process, we will incur significant costs and may even have to forgo certain revenues that interfere with user experience," it said.
Despite this, Vestact analyst Paul Theron said he remained confident in both Tencent and Naspers. "Tencent certainly seems like an attractive investment," said Theron.
"As long as it continues to do well, Naspers will do well," he said. "I certainly won't be getting off the Naspers boat just yet," he said.
- Fin24.com
