Johannesburg - Naspers [JSE:NPN] is asking Investec to withdraw an analyst report that it says contains errors and has damaged Africa’s biggest company by market value and its shareholders.
In the note dated January 22 seen by Bloomberg News, Investec analysts David Smith and Thapelo Mokonyane said Naspers should be valued at a 30% discount to its assets. That’s due to a gradual increase in the number of outstanding shares over 11 years, taxation issues and costs associated with financial transactions, referred to in the report as friction costs, they said.
“While we believe that everyone is entitled to their views, the Investec report on Naspers contains factual inaccuracies and misleading information,” Meloy Horn, head of investor relations at Naspers, said in an emailed response to questions about the note.
“The report is causing us and shareholders significant damage. We will therefore be writing to Investec and formally ask them to withdraw the report and correct these matters.”
Investec and the analysts declined to comment. The Johannesburg-based lender’s hold rating is the only one out of 16 analysts tracked by Bloomberg, with all others a buy.
Naspers stock, which accounts for almost a fifth of the weight of Johannesburg’s stock exchange, has fallen more than 16% since the report was released and is trading at a four-month low.
About R200bn ($16.6bn) has been wiped off the value of the company in six consecutive trading days of declines. The shares traded 3.9% lower at R3 120 at the close in Johannesburg on Monday, valuing the company at almost R1.4 trillion.
“The Investec report on Naspers may have contributed to the share price pressure but there are other factors such as a stronger rand,” Peter Takaendesa, portfolio manager at Mergence Investment Managers in Cape Town, said by email.
“We saw some other brokers reducing their price targets on Naspers.”
Naspers has long traded at a discount to its 33% stake in Chinese internet giant Tencent Holdings - the company’s crown jewel - which the South African business bought in 2001. Chief Executive Bob Van Dijk has been looking for new investments to replicate that success and help close the valuation gap, and has put cash into a range of global internet companies from the US to Russia and India.
Naspers’s stock has ridden the coat tails of Tencent as it became China’s biggest company, and is the third-best performer on the FTSE/JSE Top 40 index over the past 12 months even after recent declines. Tencent has declined 2.5% since January 22, which may also have contributed to Naspers’s fall, according to Horn.
Naspers’s share dilution over the past 11 years, a result of paying certain employees in stock, has averaged about 0.9% a year, according to Horn, and not 1.9% as the analysts have calculated.
The benefit of owning the Tencent stake hasn’t been affected by the release of new shares and the company is ending its policy of paying compensation with stock plans as historical awards have been paid out, she said.
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