BROKERS’ NOTES: Buy Naspers, sell Thungela

Willem Oldewage, senior analyst: Nitrogen Fund Managers

Buy: Naspers (NPN)

Naspers presents an attractive investment opportunity due to the current discount to its underlying assets. This is driven primarily by its holdings in Tencent, which showed resilience in the Chinese technology sector during the recent sell-offs. Additionally, Naspers holds Delivery Hero, which has gained an activist investor, a development that has been met favourably by the market and is contributing to the overall NAV.

Naspers recently derated when compared with its sister company Prosus, and continues to buy back shares to take advantage of the large discount, signalling confidence in the company’s future prospects. Naspers’s diversified portfolio, spanning beyond technology, enhances resilience to market fluctuations and offers growth opportunities. Its portfolio performance and valuation metrics make it an attractive choice for investors seeking value and growth.

Sell: Thungela (TGA)

Thungela faces headwinds in the coal sector, and is heavily dependent on Transnet Freight Rail. Thungela receives a discount to the Richards Bay steam coal price due to quality differentials, affecting its earnings. Furthermore, Thungela maintains a large cash buffer, resulting in relatively low dividends for investors. Recent outperformance compared with coal comparables such as Glencore and Exxaro is generally temporary rather than sustainable. Moreover, the company’s earnings delivery has been volatile, adding uncertainty to its investment outlook.

Thungela’s reliance on the coal sector, coupled with unpredictable commodity markets, exposes the company to significant risk. When considering these factors alongside recent price movements, investors may find it prudent to reallocate capital to opportunities with stable earnings prospects and less exposure to sector-specific risks.