The company has been an excellent investment, having returned 82% over the past 12 months. However, the psychological R2 000 per share mark is proving a tough nut to crack, especially with concerns that Chinese subsidiary Tencent has been overpriced and that the market may well be suffering from Naspers fatigue.
Asset manager Vestact makes the point in a recent note to clients: “Take the Tencent market cap in Hong Kong, which right now is HK$1.58 trillion (R20.445 trillion). Naspers owns 33.85% of Tencent, that translates to HK$534 billion. One Hong Kong Dollar at the current exchange rate is R1.56. So, quite simply, multiply HK$534 billion by R1.56 that equals R834.8 billion. Naspers had a market capitalisation of R813 billion at the open today, up 3.7% as I write this in early morning trade which equals R843 billion. The difference between what the stake in Tencent is worth, relative to what the JSE buyers are willing to pay is roughly R8 billion.
“Effectively, the South African asset management community is telling you that the people of Hong Kong, or the folks valuing Tencent on a 53 multiple are overpaying. With growth rates in the mid-30s, the PEG ratio is somewhere in the region of 1.43 times, which is starting to reach expensive levels.”
Stockbrokerage Imara SP Reid made a similar point with the share hit R1 198 last year and valued the share as “fully valued” and noted in a November 2014 note: “In our view the current results and ROE (return on equity) of 11% are, simply put, not good enough for the current stock price.
According to analyst consensus forecast on FT.com, the share will “outperform” the market according to views from 18 polled analysts.
Naspers has been driven by a surge in Chinese stocks but analysts are raising concerns that equity markets are overcooked and it may pay to err on the side of caution in China.