Some guys have all the luck. Or is it business acumen?
Today, that stake (now diluted to 34%) is worth $66 billion, and Bekker is a billionaire. His wise move also transformed Naspers into South Africa’s largest company by market cap as well as a global media giant – quite a change from its origins as a sleepy South African newspaper and pay TV company.
But is it possible to have too much of a good thing?
Naspers Stock Tied to Tencent
At this point, investors see Naspers as nothing more than a way to get in on Tencent. Furthering that outlook, the Financial Times says Naspers shares had a 98.5% correlation with Tencent’s shares over the past five years.
But Naspers is a whole lot more than a play on Tencent.
I prefer to think of it as an emerging market venture fund specializing in e-commerce. Naspers still has the South African print business and an African pay TV business, which are the company’s cash cows. Meanwhile, its emphasis is on building e-commerce and online classifieds businesses in the emerging world. In fact, the company provides media services in more than 130 countries.
Amazingly, though, Naspers’ market capitalization is only equal to the value of its Tencent stake – which means investors are essentially getting the rest of its myriad businesses for free.
Naspers Worth More Than Tencent
As I said before, Naspers is something of a venture capital firm, and it has a successful track record, too.
Naspers accumulated a number of quality businesses under Bekkers’ (he’s now chairman only) leadership, and this is likely to continue under current CEO Bob van Dijk. Some of the better-known companies in which Naspers has a stake include Russian internet firm Mail.Ru Group (29%) and Indian e-commerce company Flipkart (19%).
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It also owns a stake in literally dozens of companies that are probably unfamiliar to U.S. investors, many of which are still in the developmental stage and aren’t making money yet.
Yet in spite of the fact that many of its holdings aren’t profitable, Naspers itself is making money. In its latest fiscal year, its core earnings rose 28%, revenue grew by 17%, and its e-commerce business soared by 37%. Naspers continues to expand, as well, spending about $355 million just in the past year on e-commerce.
David Semple, Portfolio Manager of the Van Eck Emerging Markets Fund, told Barron’s: “Naspers looks expensive, but once you dig down under the hood there are some very enticing prospects there.”
Among these are leading companies in online classifieds, such as 58.com (through Tencent), OLX, Avito (Russia), and Dubizzle (Middle East). OLX is a leader (240 million active users) in many markets, such as Nigeria and India – the latter of which will be key to Naspers reaching breakeven.
In addition, Naspers also has the ibibo Group travel business, which dwarfs its competitors in India. And then there’s the aforementioned Flipkart, which some predict will become India’s Alibaba Group (BABA). Will Naspers get “lucky” again?
The potential is there, as India’s e-commerce market is forecast to reach $180 billion by 2023.
Online shopping in India – with about 1.25 billion people and 900 million mobile phone users – is growing faster than in any other country. Between 2009 and 2013, online shopping soared at a compound rate of 77%. That compares favorably with 32% in China and 34% in Brazil and Russia, according to Naspers.
The bottom line? Naspers is successfully developing internet and e-commerce winners in the emerging world and is hardly a one-trick (Tencent) pony. Plus, investors are getting the other businesses for basically nothing right now.