Tencent 1Q numbers - still massive growth


Tencent reported numbers in the late morning yesterday. Tencent is difficult for most investors to understand. I don't talk for all investors, perhaps investors spend more time reading than they do partaking in role-player or single shooter games either on their PC or on their mobile phone. Plus, many investors in Naspers/Tencent do not get to experience the entire experience from the company, as it is in a different language and in many respects a closed off internet society, if that makes sense.


Naspers sells non-core asset Souq


Another announcement that has to do with the shares that we own is that Souq finally sold to Amazon, even though the founder could have extracted more for his efforts. See the announcement on the Souq website - Joining the Amazon family. Ronaldo Mouchawar is an interesting guy, for one he is born in Aleppo, a city that has heartbreaking before and after pictures. He is tall, a former basketball player in his earlier days. He could have accepted a higher offer from another suitor, feeling however that the Amazon offer would do good by the customers.


Tencent buys 5% of Tesla


A 13-G announcement from Tesla seemed innocuous at first glance - SCHEDULE 13G. However, if you dug a little deeper, you suddenly discovered that the investor was none other than Tencent, the Chinese business that we know very well, through our investments in Naspers. So how much is this exactly? We worked it out, they paid for the full stake (8,167,544 shares divided by 1,777,842,836 Dollars) 217.67 Dollars a share. At the closing value last evening, the stake is worth 2.266 billion Dollars. Tencent are now officially a five percent shareholder of Tesla, which is cool from our perspective down here in South Africa. Why? As a Naspers shareholder, who owns around 34 percent of Tencent, you now indirectly own a stake in Tesla.


Tencent 4Q numbers - strong growth with diversification


Tencent released numbers after the Hong Kong market had closed yesterday and before the US market had opened. As such, there was only a single platform where to see the reaction, and that was here in Jozi. Naspers own a little over one-third of Tencent, in one of the best initial investments known. The results for the full year to end 31 December 2016.


Naspers 6 month numbers - shifting gears


Naspers delivered results on Friday afternoon. First thing to remember is that back in April the company changed their reporting currency to Dollars, for the purposes of standardising across multiple geographies. As they point out in these results, revenues derived outside of the borders of our country represent 80 percent of total revenues, so it makes sense to report in US Dollars and not Rands anymore. This is a sign of the business continuing to mature and attract more customers across the globe, as we often say, you cannot carry your hopes on only 50 odd million customers, you need to attract all of them, all across the globe! As the release points out, costs for their ecommerce business are incurred in the local currency, as such the currency movements are "diffused", whereas in the video entertainment segment (TV and streaming) you earn local currencies, your costs are in Dollars. i.e. your subscribers are buying content in local currencies, you are paying Dollars for said content.


Naspers trading statement - still growing quickly


Naspers released a trading statement on Friday afternoon. Just Thursday we had the numbers from their largest investment, Tencent, we covered those Friday - Tencent 3Q numbers - Strong top & bottom line growth. This trading statement has a few moving parts. As they often say (the Naspers board, they!), they consider "core headline earnings an appropriate indicator of the sustainable operating performance of the group, as it adjusts for non-recurring and non-operational items."


Tencent 3Q numbers - Strong top & bottom line growth


Tencent released numbers yesterday, you will recall that we teed you up with the WSJ article that included analyst expectations. It is one of my least favorite things (forecasting to the decimal point), humans however like an element of control in "all things" and tend to have all sorts of weird phobias associated with the things that we can't control. Spiders to flying, to the dark and so on, we all have different ways of avoiding or dealing with our fears. Anyhows, Naspers, at the turn of the last millennium invested in a small Chinese internet company called Tencent, the rest as they say is history. I wonder if it really was one of the best deals of all time, it may well be.


Naspers Ibibo mergers with MakeMyTrip


News in a couple of days ago, about Naspers, and this time on another business that the market doesn't seem to give a value to. Michael said something interesting yesterday, he said that he thought Naspers unlocking value by selling these non core assets is great for the most investors, particularly those who think the business is over valued. What he means is that many South Africans in their pension funds or in their index trackers (around 20% weighting now), own Naspers indirectly. In short, Naspers will combine their Ibibo business (Tencent also owns a stake) with another Indian travel website, MakeMyTrip. MakeMyTrip happens to be listed on the New York Stock Exchange. We will get into that in a second.


Naspers sells Allegro for $3.2 billion


Check out the release from the horse's mouth: Naspers to sell Allegro Group to Cinven, Permira and Mid Europa. 3.253 billion Dollars is the price tag, or 46.61 billion Rand. Or at the closing price, and by extension market capitalisation on Friday, 4.59 percent. Which is not mind blowing, it is however pretty big in quantum. If that deal size (46.61 billion Rand) was a single business here, listed on the JSE, it would currently fall into 44th place, just smaller than GoldFields and PSG. And is bigger than Kumba and Sappi, by their market capitalisation. The same size as Massmart and EOH put together. Really.


Tencent 2Q numbers - growth accelerating


Tencent are very important to Naspers. Possibly more important to the share price than all the other parts put together. The South African company owns over one-third of a percent in the Chinese "internet" company. In the last annual report that is available to investors to read, MIH, a subsidiary of Naspers, owned 3,151,201,900 shares or 33.51 percent of Tencent. Ma Huateng or Pony Ma as he is better known, owns 855,446,400 shares, or 9.1 percent of the company through an entity called Advance Data Services Limited.


Naspers FY numbers


It is Naspers time. It is more than a little complicated when trying to review this business, and that is why there has always been various views on why you should or shouldn't own the stock. At a face value the stock from an earnings point of view always looks overpriced. Not all valuation metrics are the same, you value the business based on the future profitability of the business. I suspect that many investors who try and value this business grapple like all of us to try and value what the likelihood of the increased investment in key areas is likely to yield. In other words, heavy investments currently in their classifieds and ecommerce businesses, mean steep losses for the time being. The longer dated investor may well think that this is very necessary for the business to jump to the next stage of investment.


Tencent buys Supercell


Staying on the tech front, Tencent to Acquire Majority Stake in Supercell from SoftBank for U$D 8.6 billion. In total Tencent will own 84% of the company, valuing it at $10.2 billion. Pre-tax profits last year for Supercell were $960 million meaning Tencent paid a low double digit multiple for the company, time will tell if this was a good purchase. The huge risk here is that their current stable of games become old and they don't come up with new games to keep the user numbers and revenues up, currently there are over 100 million people a day who play supercell games.


Naspers moves into online education with $75 million investment


The news came yesterday that Naspers had invested a 60 million Dollar stake in Udemy. Udemy describes themselves on their About Us sections as "We're the world's online learning marketplace, where 10 million+ students are taking courses in everything from programming to yoga to photography-and much, much more. Each of our 40,000+ courses is taught by an expert instructor, and every course is available on-demand, so students can learn at their own pace, on their own time, and on any device."


Tencent 1Q numbers - strong growth


Tencent results yesterday! This was for their first quarter of 2016. Follow the link to download the .pdf. As you can see clearly, revenues rose 43 percent to 31.995 billion Renminbi, or 4.952 billion Dollars. Or in their listed environment, Hong Kong, in those Dollars that equals 37.95 billion Hong Kong Dollars. Or to really get a sense of how big this business would be in a South African context, that is revenues from Tencent (for the last quarter) of 77.75 billion Rand.


Tencent FY and 4Q numbers - Still showing strong growth


TenCent reported numbers yesterday, after the market had closed in Hong Kong. So we got the benefit of what people thought of them, translating that through to the Naspers share price. Remember that Naspers owns over one-third of the Chinese internet/entertainment business. They bought it for peanuts. If Koos Bekker does nothing else from here (which I am sure at 63 he won't, he still has lots to give), then the team that worked on that transaction hopefully had their boots stuffed full of Naspers stock options. Naspers stock here locally added 2.62 percent to close at exactly 2100 Rand a share. The all time high reached last November was 2270 Rand, we are still a way off that. This morning, TenCent stock in Hong Kong is up around three and a one-third of a percent, around 8 odd percent away from their all time highs. That was reached last April.


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