NPN - Naspers Limited (JSE)

[MrB]

China finally grants a game license to Tencent

 

https://techcrunch.com/2019/01/24/tencent-netease-games-approved-finally/

[Lakesider]

Great, I was starting to get worried after what the censor said about Tencent's news app.

 

If they get PUBG and Fortnite licenses the gaming division could turn a corner.

 

 

"Tencent on Thursday received licences for two lesser-known functional mobile games, which lets users design wood furniture and Chinese traditional folding fans." These two "games" sound like real money money spinners.  ::)

 

 

[Jurgis]

Very small amounts of MCHOY posted to my accounts. For some reason, I thought this was going to be a bigger chunk. But I never really looked at it in depth. I doubt MCHOY is attractive buy or hold. I may just hold what I got in spinoff since the amount is small.

[cameronfen]

Very small amounts of MCHOY posted to my accounts. For some reason, I thought this was going to be a bigger chunk. But I never really looked at it in depth. I doubt MCHOY is attractive buy or hold. I may just hold what I got in spinoff since the amount is small.

 

Why do you think MCHOY not attractive?

[MrB]

Very small amounts of MCHOY posted to my accounts. For some reason, I thought this was going to be a bigger chunk. But I never really looked at it in depth. I doubt MCHOY is attractive buy or hold. I may just hold what I got in spinoff since the amount is small.

Which is why spinoffs are usually a good place to look for value

[Lakesider]

Multichoice should be a classic Greenblatt so could be worth keeping an eye on it. Tiny fraction of original business in an unattractive area completely different to naspers. People will be forced to sell.

 

 

 

[cameronfen]

Regarding Multichoice, am I missing something here?  The South African unit of MultiChoice earned 10 billion rand last year (total profits are lower as they are building out business in other countries).  Sure this is somewhat of a melting ice cube as they are in linear TV, but they are in growing countries in Africa, they are still growing at 7-10% a year on the top line and have no debt.  This thing has a market cap of 45 billion rand.  OTT television penetration is still at only at something like .1% in Africa. 

[Lakesider]

Its going to yield about 5% also

https://www.businesslive.co.za/bd/companies/2019-01-22-multichoice-sets-r25bn-aside-for-maiden-dividend/

[Lakesider]

Looks like they have decided to spin off the crown jewels to europe.

 

https://www.ft.com/content/6130128c-4ecd-11e9-9c76-bf4a0ce37d49

[Jurgis]

Any link not behind FT paywall? Thanks

[wachtwoord]

Any link not behind FT paywall? Thanks

 

https://chinaeconomicreview.com/naspers-to-shift-100-billion-tencent-holding-to-european-listing/

[dontdodebt]

Sorry for being a bit slow.

This means that if you hold nasper today, that holding will be split up and you will own one part that is listed in Amsterdam and the other part still listed in Africa?

[reader]

Yes,

All the none SA internet holding will be list as Newco in Amsterdam.

25% spun off to Naspers shareholders.

75% retained by Naspers.

If you own the ADR you may get another ADR.

 

 

 

 

 

Sorry for being a bit slow.

This means that if you hold nasper today, that holding will be split up and you will own one part that is listed in Amsterdam and the other part still listed in Africa?

[dontdodebt]

Ok thanks.

[Lakesider]

Retaining the 75% at Naspers will still cause the index over weighting problems that CEO describes.

 

I speculate that this may be part of strategy to distance themselves from south Africa. They spun off African assets, I read they are opening a new office in US, now spinning off further assets.

[jsgcapital13]

The deal website has more details, including video presentation from CEO/CFO with more color on deal rationale:

 

https://www.newglobaltechgroup.com/en/home/

 

I don't see how this fixes the Tencent discount issue at Naspers. Perhaps NewCo valuation has less of a discount once listed in Amsterdam, though I suspect there will still be some discount to account for 1) super majority shareholder 2) holding co discount 3) unclear tax liability. At JSE listed Naspers, there is likely to be another layer of discount, similar to double CHTR discount at GLIBA (GLIBA owns LBRD - at a discount, arguably - which owns CHTR at a discount, more clearly).

 

I can appreciate that listing in Amsterdam will create new investor demand and shift some market cap from JSE to Amsterdam exchange, but it also adds another layer of complexity, which normally warrants its own discount. IMO, this is a mess, inelegant solution to address the significant SOTP discount, but at least it shows the company is being proactive/thoughtful about addressing the discount. Management has rebuffed the idea of share repurchases as they believe they can capture more value by investing capital at a higher IRR/NPV, though maybe we see buybacks sooner than later if this step does not prove fruitful. At the very least, I would like them to announce some buyback program so they can have the flexibility to purchase shares opportunistically based on the prevailing discount dynamic. 

 

 

[jsgcapital13]

this screenshot is the key slide from the presentation they released yesterday.

 

using the 2.2b share count for the US ADRs, each 5% reduction to the discount = $3.86 to the share price or +8.6% using $45 last close.

[villainx]

If asking for advice isn't inappropriate.  I have a fairly small starter position, which means even more minuscule position in MCHOY.  Originally got in for SOTP and exposure to Africa and savvy deal makers.  But thinking about exiting because are these maneuvering really adding value, my portfolio is getting messy, and I'm not sure what exactly NASPER is going to end up being (assuming more spins). 

 

Any thoughts?

 

[MrB]

The deal website has more details, including video presentation from CEO/CFO with more color on deal rationale:

 

https://www.newglobaltechgroup.com/en/home/

 

I don't see how this fixes the Tencent discount issue at Naspers. Perhaps NewCo valuation has less of a discount once listed in Amsterdam, though I suspect there will still be some discount to account for 1) super majority shareholder 2) holding co discount 3) unclear tax liability. At JSE listed Naspers, there is likely to be another layer of discount, similar to double CHTR discount at GLIBA (GLIBA owns LBRD - at a discount, arguably - which owns CHTR at a discount, more clearly).

 

I can appreciate that listing in Amsterdam will create new investor demand and shift some market cap from JSE to Amsterdam exchange, but it also adds another layer of complexity, which normally warrants its own discount. IMO, this is a mess, inelegant solution to address the significant SOTP discount, but at least it shows the company is being proactive/thoughtful about addressing the discount. Management has rebuffed the idea of share repurchases as they believe they can capture more value by investing capital at a higher IRR/NPV, though maybe we see buybacks sooner than later if this step does not prove fruitful. At the very least, I would like them to announce some buyback program so they can have the flexibility to purchase shares opportunistically based on the prevailing discount dynamic.

 

Fair comment, but what might be worth considering is wouldn't the first steps on the way to the perfect scenario you're envisioning look like the ones they've recently taken?

Untangling Naspers is a process. 

 

[jsgcapital13]

The deal website has more details, including video presentation from CEO/CFO with more color on deal rationale:

 

https://www.newglobaltechgroup.com/en/home/

 

I don't see how this fixes the Tencent discount issue at Naspers. Perhaps NewCo valuation has less of a discount once listed in Amsterdam, though I suspect there will still be some discount to account for 1) super majority shareholder 2) holding co discount 3) unclear tax liability. At JSE listed Naspers, there is likely to be another layer of discount, similar to double CHTR discount at GLIBA (GLIBA owns LBRD - at a discount, arguably - which owns CHTR at a discount, more clearly).

 

I can appreciate that listing in Amsterdam will create new investor demand and shift some market cap from JSE to Amsterdam exchange, but it also adds another layer of complexity, which normally warrants its own discount. IMO, this is a mess, inelegant solution to address the significant SOTP discount, but at least it shows the company is being proactive/thoughtful about addressing the discount. Management has rebuffed the idea of share repurchases as they believe they can capture more value by investing capital at a higher IRR/NPV, though maybe we see buybacks sooner than later if this step does not prove fruitful. At the very least, I would like them to announce some buyback program so they can have the flexibility to purchase shares opportunistically based on the prevailing discount dynamic.

 

Fair comment, but what might be worth considering is wouldn't the first steps on the way to the perfect scenario you're envisioning look like the ones they've recently taken?

Untangling Naspers is a process.

 

the perfect scenario - at least insofar as i imagine it - is that naspers is able to deploy its capital at double digit+ IRRs (as it has done even when excluding the tencent miracle) while tencent continues to grow. as tencent grows, naspers trims its position and uses proceeds to buy back stock at a significant NAV discount, which augments the NAV/share growth. In my opinion, this is preferable to Naspers simply spinning off the Tencent position (creating a Altaba / Alibaba structure). The NAV discount is an opportunity to create value in an incredibly low risk way. having multiple layers of ownership adds to the complexity, which could lead to the discount persisting, though as mentioned above, the new listing hopefully creates new demand for the holding company, which should help the discount [there are puts and takes to this step, but i agree (/hope) that it should be a net-benefit].

 

i'd like to see executive compensation tied to narrowing the discount in some fashion. they should not continue to get paid based on what tencent does (ie yesteryear's grandslam)

 

 

[Lakesider]

I am considering selling of my Naspers shares and buying the Dutch spinoff. The parent is likely still going to have the same problems on the JSE so the Spin will outperform the parent. In the short term I agree this complicates the structure and could increase the discount.

 

Thoughts?

[bjakes00]

The deal website has more details, including video presentation from CEO/CFO with more color on deal rationale:

 

https://www.newglobaltechgroup.com/en/home/

 

I don't see how this fixes the Tencent discount issue at Naspers. Perhaps NewCo valuation has less of a discount once listed in Amsterdam, though I suspect there will still be some discount to account for 1) super majority shareholder 2) holding co discount 3) unclear tax liability. At JSE listed Naspers, there is likely to be another layer of discount, similar to double CHTR discount at GLIBA (GLIBA owns LBRD - at a discount, arguably - which owns CHTR at a discount, more clearly).

 

I can appreciate that listing in Amsterdam will create new investor demand and shift some market cap from JSE to Amsterdam exchange, but it also adds another layer of complexity, which normally warrants its own discount. IMO, this is a mess, inelegant solution to address the significant SOTP discount, but at least it shows the company is being proactive/thoughtful about addressing the discount. Management has rebuffed the idea of share repurchases as they believe they can capture more value by investing capital at a higher IRR/NPV, though maybe we see buybacks sooner than later if this step does not prove fruitful. At the very least, I would like them to announce some buyback program so they can have the flexibility to purchase shares opportunistically based on the prevailing discount dynamic.

 

Fair comment, but what might be worth considering is wouldn't the first steps on the way to the perfect scenario you're envisioning look like the ones they've recently taken?

Untangling Naspers is a process.

 

the perfect scenario - at least insofar as i imagine it - is that naspers is able to deploy its capital at double digit+ IRRs (as it has done even when excluding the tencent miracle) while tencent continues to grow. as tencent grows, naspers trims its position and uses proceeds to buy back stock at a significant NAV discount, which augments the NAV/share growth. In my opinion, this is preferable to Naspers simply spinning off the Tencent position (creating a Altaba / Alibaba structure). The NAV discount is an opportunity to create value in an incredibly low risk way. having multiple layers of ownership adds to the complexity, which could lead to the discount persisting, though as mentioned above, the new listing hopefully creates new demand for the holding company, which should help the discount [there are puts and takes to this step, but i agree (/hope) that it should be a net-benefit].

 

i'd like to see executive compensation tied to narrowing the discount in some fashion. they should not continue to get paid based on what tencent does (ie yesteryear's grandslam)

 

If I could, I’d upvote this comment. I couldn’t agree more (and apologies for the low value add comment in advance)