Africa's Biggest Company Sees E-Commerce Growth Closing $32 Billion Value Gap

  • Stake in Chinese internet giant is paying off, chairman says
  • No short-term link between profitability and value: Bekker

Naspers has for years scoured the world looking for another early stage technology company that will eventually replicate the success of Tencent, in which it invested $32 million 16 years ago.

Photographer: Brent Lewin/Bloomberg

Chairman Koos Bekker countered criticism Naspers Ltd. relies too heavily on its $132 billion stake in Chinese media company Tencent Holdings Ltd. by reminding investors that they would have been a lot poorer if he’d given in to similar pressure to sell the holding years ago.

“Five years ago there was also a lot of unhappiness,” Bekker told shareholders at the annual meeting in Cape Town on Friday. “If we had sold then, you would have gotten 45 Hong Kong dollars, now you get 325. We are not married to the share, but at this point in time it’s paying shareholders.”

Koos Bekker

Photographer: Halden Krog/Bloomberg

Africa’s biggest internet company has ridden the coattails of the WeChat creator to be the best performer on Johannesburg’s FTSE/JSE Africa Top 40 Index this year with a 50 percent rise. The catch is that the market values the 33 percent stake in the Shenzhen-based company at almost $32 billion more than Naspers as a whole, suggesting investors don’t see value in the Cape Town-based company’s many other businesses.

Naspers has for years scoured the world looking for another early stage technology company that will eventually replicate the success of Tencent, in which it invested $32 million 16 years ago. The company has since put money into a wide range of assets, including Russia’s Mail.Ru Group Ltd. and Indian travel agency MakeMyTrip, yet last year’s sale of Polish online auction site Allegro for $3.25 billion is one of its few profitable exits.

Bekker said that the assumption that Tencent is making money and Naspers’s other ventures are loss-making was “illiterate” as profitability doesn’t accurately capture the value of the businesses. He said the biggest internet companies grow faster in both China and the U.S. and that the argument for breaking up technology companies is flawed.

“Amazon, for instance, has made losses at times,” Bekker said. “The link between short-term profitability and value is simply not there.”

Bekker was speaking at a meeting that only really heated up when some shareholders seized the opportunity to question Naspers’s executive pay policy. The results of the vote on pay will be available later.

Allan Gray Ltd., holder of a 2.3 percent stake, said earlier this week that the remuneration paid to top executives including Chief Executive Officer Bob Van Dijk isn’t aligned to the performance of the underlying business, excluding Tencent.

The CEO was paid $2.2 million in the year through March, an increase of 32 percent, and awarded $10.4 million in long-term share options. In that time, Naspers made a trading loss of $379 million when Tencent’s contribution is stripped out.

Meanwhile, Naspers is considering merging its internet streaming business Showmax with the satellite pay-TV unit to cut costs and share exclusive content, people familiar with the matter said on Friday.

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