Naspers Targets Growth in Food to Cut Value Gap With Tencent

JOHANNESBURG (Capital Markets in Africa) – Naspers Ltd. is planning to invest more in businesses including food delivery to help narrow the valuation gap between Africa’s biggest company and its stake in Chinese internet giant Tencent Holdings Ltd.

The 33 percent shareholding in the Shenzhen-based company is worth about $166 billion, while Naspers itself is valued at $124 billion. There’s no reason for a discount at this “unusually high level,” Chief Financial Officer Basil Sgourdos said in phone interview on Wednesday.

“We are working hard to scale our other businesses to reverse this,” the CFO said. “We have strikingly accelerated our growth, profitability, and scale especially in our e-commerce businesses.”

Naspers sees food delivery as a particularly good opportunity, and is seeking more deals in the industry after the 660 million euros ($781 million) purchase of shares in Germany’s Delivery Hero AG in September, Sgourdos said. That business sits alongside iFood in Brazil, Swiggy of India and Mr. Delivery in South Africa in the company’s portfolio. Other e-commerce investments include online travel agents in India and education software providers in the U.S.

‘Fantastic Returns’
“We have seen some fantastic returns when it comes to our investments in food businesses,” the CFO said. “Recently we have invested substantially in food delivery. We really do like the segment and we believe there is a fundamental growth opportunity.”

The CFO was speaking after Naspers reported a 65 percent increase in first-half adjusted net income to $3.50 per share. That compared with 31 percent growth the previous year, and was about in the middle of a range forecast by the Cape Town-based company on Nov. 17. Tencent earlier this month posted third-quarter net income that beat estimates.

Naspers shares rose 1.5 percent to 3,834.97 rand at the close of Johannesburg, extending the year’s gains to 91 percent. It’s the year’s best performer on the FTSE/JSE Africa Top40 Index. The company should buy back its own shares to take advantage of the discount to Tencent, veteran emerging markets investor Mark Mobius said last month.

Naspers is also Africa’s largest pay-TV provider and increased subscriber numbers by 11 percent to 12.2 million in the six-month period.

Source: Bloomberg Business News