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Naspers tumbles most in a decade as Tencent effect hits home

Aug 15 2018 13:21
John Viljoen and Lulu Yilun Chen, Bloomberg

Naspers, Africa’s largest company by value, plunged the most in almost 10 years in Johannesburg trading after Chinese internet giant Tencent Holdings posted earnings that missed analyst estimates.

Naspers [JSE:NPN], which owns a 31% stake in Tencent, slumped as much as 10%, the most intraday since October 2008. The South African benchmark index dropped as much as 2.7% on Wednesday, reflecting Naspers’s 18% weighting in the gauge.

Naspers was 6.3% lower as of 12:53.

Earlier on Wednesday, Tencent surprised investors with its first profit drop in at least a decade as a Chinese regulatory freeze on game approvals hurt its ability to make money off marquee titles.

Net income fell 2% to 17.9bn yuan ($2.6bn) in the three months ended June, the Shenzhen-based company said. That is well short of the 19.3 billion-yuan average of analysts’ estimates.

The result underscored slowing growth in cash cow mobile game Honour of Kings, increased spending and fewer investment gains.

After soaring into the ranks of the world’s biggest companies, Tencent has lost more than $150bn of market value as the company was unable to monetise new games.

China ordered it to shut down Monster Hunter: World from its PC downloads service just days after its debut while the country’s watchdogs are said to have frozen approval of game licenses. That contributed to a 19% drop in mobile gaming revenue from the first quarter.

“The results were really bad," said Benjamin Wu, an analyst at Shanghai-based consultancy Pacific Epoch. “The fact that Monster Hunter got taken down shows that even Tencent isn’t immune from regulatory crackdowns."

Other concerns include the hold-up for PlayerUnknown’s Battlegrounds on desktops and still-absent approval to start earning off Chinese players of the mobile version — the country’s second most popular game in June by time spent.

“Tencent’s gaming business did even worse than expected,” said Li Yujie, an analyst at RHB Research Institute in Hong Kong. “Despite having a lot of players for PUBG, its inability to monetize the game is causing a slowdown in revenue growth.”

Revenue rose 30% to 73.7bn yuan, but that again fell short of analysts’ estimates for 77.7bn yuan. Shares of Tencent fell 3.6% to HK$336 in Hong Kong before earnings were announced.

The stock has slid more than 17% this year, while New York-listed rival Alibaba Group Holding remained mostly unchanged.

Tencent still commands a powerful asset in WeChat, the ubiquitous messaging service that underpins its gaming and ads business. Monthly active users climbed almost 10% to 1.06 billion.

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