Bob van Dijk: Naspers remains committed to SA. Picture: Bloomberg/Halden Krog
Bob van Dijk: Naspers remains committed to SA. Picture: Bloomberg/Halden Krog

The market hardly gave Naspers a round of applause for proposals to unbundle and separately list its video entertainment group MultiChoice on the JSE. The tech conglomerate’s share price, at midday on Tuesday, was largely unmoved.

One suspects that a rousing ovation would be reserved only for when Naspers unbundles its 31% stake in Chinese internet giant Tencent — an event unlikely to transpire any time soon, or ever.

Technically, the move should be welcomed as shareholders now have a chance to unlock value from part of Naspers’s so-called rump — outside of the Tencent investment — that has been slapped with a negative valuation by the market. But judging from the initial reaction, the market appears to be in two minds. Some punters hold that Naspers is handing over an ex-growth entertainment dinosaur to shareholders; others argue that investors should appreciate the group’s cash flow prowess and African expansion opportunities.

The MultiChoice listing — set for early next year — will be a sizeable one, with Naspers executives already ranking the offshoot as a top 40 listed company on the JSE.

But Naspers has become practically a proxy for its significant stake in Tencent — so the market overlooks the group’s sprawling other interests, which span e-commerce, online classifieds, food delivery and media.

Estimates put the market capitalisation range for MultiChoice between R90bn and R120bn, with group CEO Imtiaz Patel reporting annual revenues of R47bn and a trading profit of R6.1bn. Naspers CEO Bob van Dijk, perhaps significantly, would not be drawn on a valuation range at a media briefing on Tuesday.

While the suggested range would be noteworthy by JSE standards, this inferred valuation of MultiChoice pales in comparison to Naspers’s R1.4-trillion market cap.

With the MultiChoice story being strongly punted, Van Dijk was asked why Naspers was shedding the business. He said Naspers had grown into an online consumer technology business, and retaining a stake in MultiChoice did not feed into that strategy.

Still, he argued, MultiChoice was "unappreciated" by the market within the overall value of Naspers. "We want to show the market how attractive MultiChoice is. It’s a top 10 global pay-TV company, and the opportunity for growth is there. It’s a very positive story."

While movie and series content is increasingly competitive, most observers agree that MultiChoice holds a considerable advantage in its dominance in mainstream sports like soccer, rugby, cricket, golf, motor racing and tennis. This advantage is likely to hold for at least the medium term.

In addition, being cut off from the Naspers mother ship is likely to focus the minds of MultiChoice’s executive team on marketing strategies and operating efficiencies. A more competitive pricing regime for MultiChoice’s DStv offering — coupled with an ability to allow customers to customise their viewing bouquet — might at least blunt the threat from new online entertainment platforms.

Cynical investors, however, maintain that MultiChoice’s days are numbered, with more competitively priced offerings like Netflix and Amazon Prime set to erode the group’s viewership.

The contention is that Naspers is smart to "set free" MultiChoice while it still has some value — and leave the fretting over the group’s long-term future to other owners.

Patel, though, still paints a vibrant operational picture, noting that MultiChoice commands the attention of 13.5-million households in Africa. More importantly, he noted annual growth of 1.5-million subscribers last year, "with more momentum in the current year". Much of the growth is driven by African markets, where Patel believes pay-TV penetration remains low.

Patel pointed out that MultiChoice would be spun out of Naspers without stifling gearing, which would allow the business to pursue its goals. The gearing issue is important for investors who might be looking at cash-pumping MultiChoice as a yield sweetener.

Perhaps the more important consideration is what the unbundling proposals mean for Naspers. For instance, could there be more efforts to unlock value — possibly an unbundling and separate listing of other businesses?

In this regard, there have been queries around whether Naspers would shed its remaining SA operations to focus on its international assets and investments.

Van Dijk was adamant Naspers remains committed to SA and to retaining a primary JSE listing.

He disclosed that Naspers had spent more than R7bn on merger & acquisition activity in SA last year, including R3.3bn on e-commerce developments alone.

Naspers also announced a R1.4bn investment in online vehicle dealership We Buy Cars.