Naspers' Tencent bet pays off as shares surge

Johannesburg - Shares in Naspers, South Africa's biggest firm by value, has been lifted by the rising fortunes of China's Tencent Holdings in which it holds a minority stake.

Shares in the media and e-commerce firm jumped 3.3% to a record R2 029, having gained about 90% over the last 12 months tracking gains in money-spinner Tencent whose stock has rocketed 52% so far this year.

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Naspers holds a 34% stake in Tencent - one of China's largest internet companies - that is worth nearly the entire R800bn market value of the South African company.

"What you're seeing in Naspers is, the majority of it, about what is happening to the Tencent stock," said Owen Nkomo from Inkunzi Investments.

Some analysts said the share price could make the stock illiquid, locking out retail investors.

Tencent overvalued

For its part, Tencent for the first time hit a market cap of more than $200bn, rising 5.38% to close at $22 as Hong Kong stocks hit fresh seven-year highs on Monday as mutual funds piled into stocks.

Some investors said Naspers could lose steam because Tencent, which accounted for the bulk of its recent half-year earnings, was overvalued.

"You'll need a lot of growth from Tencent to justify Naspers valuation," said Victor von Reiche, Senior Investment Analyst at Cannon Asset Managers. "We don't think there's enough margin for safety, given that Tencent looks overvalued itself."

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Tencent should drop by about 60% to what Thomson Reuters StarMine estimates as its intrinsic value or what StarMine believes the stock should trade at based on its most likely growth trajectory over the next five years.

On trailing price to earnings basis, Naspers is the most expensive stock on the Johannesburg bourse, trading at 68 times, well above an average of 20 times on the JSE Top-40 index.

Naspers also has a highly lucrative pay-television business across South Africa and much of Africa, and stakes in newspapers and magazines in South Africa and other emerging markets.

Founded in 1915 as Nasionale Pers, or "National Press", Naspers was widely seen as the mouthpiece for the white minority government of the time. It began its overseas push following the end of apartheid in 1994.

*Fin24 is part of Media24, which is owned by Naspers.