Naspers CEO Bob van Dijk at the opening of trading for the debut of the new Prosus unit of Naspers at the Amsterdam Stock Exchange. Picture: BLOOMBERG/JASPER JUINEN
Naspers CEO Bob van Dijk at the opening of trading for the debut of the new Prosus unit of Naspers at the Amsterdam Stock Exchange. Picture: BLOOMBERG/JASPER JUINEN

As a wave of distress sweeps across corporate SA during the Covid-19 pandemic, Naspers’s global internet arm, Prosus, is among the biggest winners as millions of homebound consumers worldwide turn to its e-commerce offering.

Shares in Prosus closed 1.63% higher at R1,540, the stock’s highest closing record since debuting on the JSE and in Amsterdam’s Euronext, where it instantly became Europe’s biggest internet company. The stock is up about 45% so far in 2020.

Investors’ growing demand for Prosus, headed by CEO Bob van Dijk, highlights the staying power of the e-commerce industry while consumers are ordered to stay at home in an effort to contain the Covid-19 pandemic. The pandemic is threatening to push brick-and-mortar retailers out of business.

The company’s surging share price has come amid mounting calls from business leaders for President Cyril Ramaphosa to allow unfettered e-commerce for online platforms such as Naspers’s Takealot.  

Old Mutual Invest portfolio manager Neelash Hansjee said Prosus has largely benefited from the growth in online gaming, in which Chinese technology giant Tencent is one of the world’s biggest players. It competes with Sony, Microsoft and Nintendo.

Prosus owns a third of Tencent, which in turn holds a stake in Epic Games, creator of Fortnite, a blockbuster online game that has racked up more than 350-million users, with 100-million added in the last year alone.

The sector has certainly benefited from quarantine measures and Fortnite has said it crossed 350-million players in April, an increase of 100-million year on year, said Vestact analyst Byron Lotter in a note.

“Gaming was already doing well but has now seen a huge boost in numbers,” Lotter said.

Prosus, now worth more than R2-trillion, has staked much of its future on the growth of e-commerce, focusing its own business on online classifieds units such as OLX, its $4.5bn (R82.5bn) online food delivery portfolio made up of Brazil’s iFood, India’s Swiggy and Germany’s Delivery Hero, and online payments platforms such as PayU.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the Prosus share price is also benefiting from a weaker rand relative to the Chinese yuan and its potential inclusion into the Euro Stoxx 50, an index of Europe’s largest listed companies.

This potential inclusion could increase demand for Prosus shares in the near term, at least from index-tracking funds that would be required to buy the shares on inclusion, he said. However, the inclusion is yet to be confirmed. It will depend on how Prosus will rank relative to other stocks already in that index, he said.

Not all of Prosus’s investments have benefited from Covid-19.

Takaendesa said some of its investments in advertising-linked e-commerce and classifieds are likely to suffer big losses during this time, given the slowdown in business globally.

Risks to Prosus shares include further potential regulatory pressure in China for Tencent, competition from other companies in the Asian country, US-China technology wars, failure to make Prosus’s other e-commerce investments profitable, and potential for a relatively stronger rand when global growth recovers, he said. 

With Karl Gernetzky

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