Naspers, whose share price has fallen in tandem with affiliate Tencent, in which it holds a 31.2% stake, offers “significant value at these levels”, Ashburton Investments said on Wednesday.

The group’s shares have shed more than a third of their value in 2018.

Ashburton fund manager said that the correction in Naspers’s share price is largely correlated to the fall in Tencent share price. “We continue to expect the Tencent share price to be the primary driver of the Naspers share price in the short to medium term. We see significant value in the Naspers share price at these levels.”

Tencent has fallen 38% in price since mid-March.

Crail said there are several reasons for the decline. “The shake-up of regulatory and oversight landscape in China has resulted in increased regulation as well as a bottleneck in new product approvals.

“The trade wars are also hotting up between the US and China. As a result, the entire tech sector in China has seen meaningful drops in their relative share prices over the past seven months. Alibaba, for example, is down 30%.”

Crail said Tencent’s recent quarterly earnings miss has put pressure on its share price. “Tencent released new games that it has not (to date) received approval to monetise, which has had an impact on earnings in the short term.”

Selloff

The recent selloff in US technology stocks has also had an impact, he said. “Over the last three months, the Fang+ Index has fallen by 20% relative to the MSCI AC World index. As US rates have started to rise, there has been a selloff in growth assets like Naspers with value stocks performing significantly better.”

Crail said that he excepts the regulatory headwinds to continue in China, but is optimistic the bottlenecks will be resolved soon.

“We also believe that Tencent has been aware of the new regulations since before they were announced and that it has taken early and significant action in order to comply.

“We expect the approval process to restart soon but would expect third-quarter numbers (at east) to be weaker than initially expected. While the concerns around the trade wars remain, we do not expect Tencent to be fundamentally scarred from the rhetoric and hence think investor nervousness is overdone.”