Naspers is asking Investec to withdraw an analyst report that it says contains errors and has damaged Africa’s biggest company by market value and its shareholders.
In a 22 January report, Investec analysts said the Cape Town-based media and technology business should be valued at a discount to its assets, Meloy Horn, head of investor relations at Naspers, said in an e-mailed response to questions about the note. One of the reasons given by Investec is a likely dilution of shareholder value due to the issue of planned stock, which she says is based on inaccurate calculations.
“While we believe that everyone is entitled to their views, the Investec report on Naspers contains factual inaccuracies and misleading information,” Horn said. “The report is causing us and shareholders significant damage. We will therefore be writing to Investec and formally ask them to withdraw the report and correct these matters.”
Investec declined to comment. The Johannesburg-based lender’s hold rating is the only one out of 16 analysts tracked by Bloomberg, with all others a buy.
Naspers stock, which accounts for almost a fifth of the weight of Johannesburg’s stock exchange, has fallen almost 17% since the report was released and is trading at a four-month low. About R200bn has been wiped off the value of the company in six consecutive trading days of declines. The shares traded 4.5% lower at R3 101 as of 4.06pm in Johannesburg, valuing the company at almost R1.4 trillion.
“The Investec report on Naspers may have contributed to the share price pressure but there are other factors such as a stronger rand,” Peter Takaendesa, portfolio manager at Mergence Investment Managers in Cape Town, said by e-mail on Monday. “We saw some other brokers reducing their price targets on Naspers.”
Naspers has long traded at a discount to its 33% stake in Chinese Internet giant Tencent — the company’s crown jewel — which the South African business bought in 2001. CEO Bob Van Dijk has been looking for new investments to replicate that success and help close the valuation gap, and has put cash into a range of global Internet companies from the US to Russia and India.
Naspers’s stock has ridden the coattails of Tencent as it became China’s biggest company, and is the third best performer on the FTSE/JSE Top 40 Index over the past 12 months even after recent declines. Tencent has declined 2.5% since 22 January, which may also have contributed to Naspers’s fall, according to Horn.
Naspers’s share dilution over the past 11 years, a result of paying certain employees in stock, has averaged about 0.9%/year, according to Horn, and not 1.9% as the analysts have calculated.
The benefit of owning the Tencent stake hasn’t been affected by the release of new shares and the company is ending its policy of paying compensation with stock plans as historical awards have been paid out, she said. — Reported by Loni Prinsloo and Neo Khanyile, (c) 2018 Bloomberg LP