At a time when the JSE all share index has been trending downwards in response to the global sell-off caused by the Covid-19 and fluctuations in the oil market, shares in technology group, Naspers seem be headed in the opposite direction.

So far this year, Naspers has gained almost 10% on the JSE, while the all share is down about 22%. 

Analysts say much of this has to do with positive performance in Tencent and people making more use of entertainment and online services around the world.

Byron Lotter, a portfolio manager at Vestact Asset Management, said Naspers share price has been resilient compared with other SA listed stocks since the global lockdown.

“That is because Tencent has held up well and the rand has weakened,” Lotter said.

He said the combined price of Naspers and its Amsterdam listed subsidiary, Prosus, is close to R3,800 a share, which is not far off its highs, adding that online retail, food delivery, gaming and WeChat were big drivers of this trend.

Mike Gresty, an equity analyst at Anchor Capital said “when one thinks of companies that actually stand to benefit from the Covid-19 pandemic, many technology companies feature in that list, often because the lockdown is accelerating the adoption of their technologies faster than would have been the case naturally”.

In the case of Naspers, about 85% of its net asset value is made up of Tencent, he said.

Tencent is seen as one of the companies that may be a relative beneficiary from the pandemic, with people stuck at home, spending more time playing online games — the biggest contributor to Tencent’s  bottom line, as well as using its social media and content streaming services, said Gresty.

He highlighted that Naspers is a good rand hedge given that it has such minimal operational exposure to the local currency. “The fact that the rand has depreciated 21.5% vs the US dollar since the beginning of the year has been a tailwind for Naspers’s performance.” 

Shaun Murison, an analyst at IG Markets, said while Covid-19 will disrupt the online classifieds business for Naspers, the more significant to earnings segments are the internet and online gaming businesses, which could still prove to be resilient over the periods of quarantine and lockdown.

How long the coronavirus will continue to be a disruption remains uncertain, said Murison.

The longer it continues the more it will negatively affect cash flows for Prosus and in turn Naspers, he said. “However, Tencent has already proven to be a more robust equity investment through the current outbreak.”

He noted that as Naspers is trading at a larger-than-usual discount to Prosus, and in turn Tencent, and is perhaps a more robust equity investment consideration for the unclear economic environment.

In the short term, Gresty said, “that much depends on whether the fairly optimistic view that I have laid out to explain why Tencent has held up so well actually plays out”.

If it turns out that the operational effect of Covid-19 on Tencent is more negative than assumed, the share could be vulnerable to a correction, he said. “Even though the discount at the Naspers level is at extreme levels, I do not believe that this would protect investors much if Tencent was to fall in price.”

On the local front, Naspers, earlier this week donated R1.5bn to SA’s Covid-19 relief effort, which includes a contribution to the Solidarity Response Fund announced by President Cyril Ramaphosa last week and the purchase of personal protective equipment and other medical supplies from China.

Shares in Naspers closed marginally down 0.4% on Friday, at R2540.43 a share, while the JSE all share was 1.03% lower for the day.


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