Naspers is looking at ways to reduce its dominance of the JSE, an issue that is hampering efforts to narrow a valuation gap between the group and its 31.2% stake in Chinese internet giant Tencent Holdings.

Naspers makes up almost a fifth of the bourse, even after spinning off most of its assets into Amsterdam-listed Prosus in 2019. Naspers stock has had a blistering start to 2021, gaining almost 18%, the best performer on the JSE top 40.

“That leads to trading dynamics that don’t help the discount, and in time we are going to see if we can mitigate some of that,” Naspers CEO Bob van Dijk said in an interview with Bloomberg TV on Wednesday.

Naspers has long struggled to close the valuation gap between itself and its Chinese star asset, most notably through the creation of Prosus, which holds almost all its internet businesses, including the Tencent stake. Yet Naspers’ valuation of R1.55-trillion remains stubbornly short of its 31% share of the WeChat-creator, which is worth about $269bn.

Growth potential

By taking up about 20% of the JSE all share, many tracker funds are forced to cap the amount of Naspers stock in their portfolio — limiting the share’s growth potential compared with that of Tencent. One obvious way to counter that would be for Naspers to break up into separate parts, according to Nick van Rensburg, CEO of Phakamani Impact Capital.

“Essentially, Naspers needs to be smaller,” he said. “I would probably split up the other businesses when they are bulky enough — you want them to be big enough to get onto an index because then you have investor demand.”

Naspers could also buy back more shares, he said, after Prosus started a $5bn repurchase of its own stock and that of Naspers in 2020.

Prosus, in which Naspers retains a 72.5% stake, controls various firms specialising in the likes of online-food delivery, payments and education businesses around the world. It is becoming “more profitable and visible to investors”, Van Dijk said, especially as the Covid-19 pandemic keeps people at home and managing their affairs online.

“That is what I spend most of my time on,” the CEO said. “When you look at the financial performance of our other businesses, they are growing faster than Tencent.”

Naspers shares traded 1.2% lower as at 3.31pm. Prosus fell 2.8% in the Netherlands, paring its gain since formation to 31%.

“Prosus in Europe is quite a small percentage of the index, which means it’s quite an attractive asset,” Van Rensburg said. “It’s easy for people to be overweight or underweight.”



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