Market Outlook: Naspers Results and NewCo Listing Delay

Naspers released its FY19 results last week (21 June), with revenue climbing 29% YoY to $19bn (c. R271bn) vs FY18’s $16.4bn.
Group trading profit increased 22% YoY in local currency terms and adjusted for acquisitions and disposals, to $3.3bn, driven by classifieds, etail, payments and fintech.
Naspers said its e-commerce business posted a strong performance and reduced trading losses by 14% YoY. Core headline earnings were up 26% YoY to USc694, which is a bit shy of consensus expectations of USc748.
However, given the number of moving parts in the Group, we don’t believe this shortfall should be of great concern.
Operationally, the general trend across the Group’s internet verticals is that the businesses are continuing to deliver strong top-line growth and margins are heading in the right direction (with the exception of food delivery). Online Classifieds, which is the vertical where most of the value sits, is now profitable.
Naspers spent $3.3bn on investments in the year under review, with its usual message being that it spends c. $500mn p.a. as a rough rule of thumb, so this is another year in which it has spent dramatically more than “usual”.
However, we believe what is positive is that the vast majority of this has gone to increasing stakes in existing businesses, rather than going off into deeply loss-making new directions with uncertain prospects. (In our view, there had been growing investor fatigue in the past at the firm constantly investing in new areas).
The sale of Flipkart and a bit of its stake in Tencent has resulted in Naspers being very cash-flush at present – after this year’s investments, it is still sitting on net cash of $6.3bn.
Naspers also announced a delay in the Euronext listing of NewCo (initially set for 17 July) in Amsterdam until early September due to “... an administrative error by an external service provider.” NewCo now has a name as well - Prosus N.V. Prosus will include all of Naspers’ internet interests outside of South Africa, including its 31% stake in Tencent and investments in, OLX, Avito, letgo, and PayU etc.

Written exclusively for Moore Stephens by Anchor Capital