Naspers is one of Africa’s best-known and respected companies. And for its latest business year, analysts expect a turnaround in its profits. We look at how an aging South African media company transformed itself into a leading tech firm.
Capital News Africa: From the Trading Floor – Week 7-2022
Naspers is a highly respected institution on African capital markets. Listed on both the Johannesburg Stock Exchange (JSE) and the London Stock Exchange (LSE), Naspers, with a market cap of US 63.3 billion, is currently the most expensive media group in the world. It is active in 130 countries worldwide.
That Naspers would become such an international powerhouse is probably a surprise to even itself. Some history: Naspers traces its roots back to a publishing house founded in 1914 by a small group of Afrikaan-speaking settlers in South Africa. The publishing house, called “De Nasionale Pers Beperkt,” put out the newspapers “Volksblad” and “Die Transvaler.” For decades, Naspers’ forerunner was the voice of the white minority that ruled South Africa.
Several years after the end of the Apartheid regime in 1991, Naspers radically changed course. With courage shared by only a few media managers, the company shifted from print to digital media. Today, Naspers is very active in the online media sphere and one of the biggest tech investors in the world.
Naspers’ shareholders have very much profited from the move. At the beginning of 1996, Naspers was trading at just ZAR 32 (EUR 1.8) per share. By November 2017, the share hit an all-time hime of ZAR 4070 (EUR 238.4), before falling back to its current price of ZAR 2500. That’s an increase of 78-fold and dwarfs the otherwise respectable 7.4-fold gain in the S&P 500 for the period.
The architect of Naspers success is Jacobus Petrus Bekker, who goes by the nickname Koos. Born to a typical white settler family in December 1952, Koos Bekker grew up in the far south-eastern side of Johannesburg. Bekker studied law and literature at Stellenbosch University and then completed a law degree at Wits University.
He then worked in advertising and got an MBA at Columbia Business School in New York in 1984. It was in the US that Bekker discovered the concept of “Pay TV.” Back in South Africa, he started M-Net and Multichoice - the first pay tv channels outside the US - and ultimately brought them to 48 African countries. He was also among the founders of South African mobile phone company MTN in the 1990s.
In 1997, Koos Bekker became CEO of Naspers after the media group had already invested in his M-Net and Multichoice tv channels. He is still at Naspers today, serving as a non-executive chairman. Indeed, his years as Naspers’ top manager have been very good to him. The US business magazine Forbes puts Bekker’s assets at USD 2.7 billion, making him one Africa’s wealthiest people.
In 2019, Naspers founded the subsidiary Prosus N.V. in Amsterdam. The two are entwined via cross-shareholdings: Naspers has a 58% stake in Prosus, and the latter owns 49% of Naspers. At the time, there was suspicion in South Africa that, with Prosus, Naspers was considering leaving the country.
Supporting such suspicion is the fact that the subsidiary Prosus includes the international holdings that Naspers had accumulated. Among them are stakes in the e-commerce company OLX; the fintech PayU; the social media platforms Tencent (30.86%) und VK (27.29%); the meal delivery service Delivery Hero (27.3%); as well as those in educational technology firms Udemy, Codecademy, Stack Overflow und Brainly.
Naspers has not, however, always been successful. Last year, its shareholders took a beating as the stock price fell to ZAR 2291 amid the crisis in Chinese tech companies in August. Tencent happens to be one of those companies. In late February 2021, Naspers’ share was trading at ZAR 3835. Since its decline, it has moved sideways within a corridor of ZAR 2346 to ZAR 2775.
Analysts remain optimistic about Naspers’ prospects, however. Of the 13 analysts who follow the share, nine of them have it on a strong “buy,” whereas the other four expect it to “outperform.” All of them expect a turnaround in its fortunes for the 2022 business year, which will end on 31 March. Although Naspers is expected to post a higher loss as measured by EBITDA (USD 292 million for 2022 versus USD 83 million for 2021), its net profit should increase significantly thanks to its huge financial results. Analysts expect the figure to improve to USD 12.1 million in business year 2022 from USD 5.3 million in 2021. Naspers’ earnings per share is, furthermore, expected to increase threefold to USD 36.10 from USD 12.00.
Regarding the price target, analysts for Naspers see the share reaching ZAR 4160 an increase of 68% from ZAR 2476 currently. This may not happen, as analysts can get things wrong. But despite the huge losses in its share price in 2021, investors should not write off Naspers.