In his first detailed comments since the Naspers share price came under heavy selling pressure from the Chinese crackdown on technology companies, Naspers CEO Bob van Dijk vowed not to abandon the world’s largest internet market.
While acknowledging the company’s share price had faced “significant” volatility due to increased Chinese regulatory intervention, Van Dijk told a company event on Wednesday that he believed in Tencent’s ability to deliver value.
“We are very firm believers in the future value creation of Tencent, for us and for all of our shareholders in SA,” said Van Dijk, who addressed the event, attended by communications & digital technologies minister Khumbudzo Ntshavheni, via a feed from Amsterdam.
“We are a global consumer internet group, and the largest internet market in the world is China. We’ve had a partnership with Tencent for over two decades and it gives us that exposure in the best possible way,” Van Dijk said.
Management at Tencent, on which current chair and former CEO Koos Bekker made a $32m gamble in 2001, is working “diligently with Chinese authorities” to navigate new regulatory requirements.
Naspers holds its stake in Tencent through Amsterdam-based Prosus. The stable lost R100bn of value in one day last week after it emerged that Tencent’s mobile payment and digital wallet service, WeChat Pay, faced a record fine for allegedly violating money laundering regulations.
In a sign of how quickly sentiment can turn, it then more than reversed those losses in a day as the Chinese government said it will “promote the development” of internet industries.
The new onslaught, which previously ensnared the business empire of Alibaba founder Jack Ma, leading to the cancellation of a proposed $37bn listing of his Ant Group, saw Prosus lose its spot as the biggest company by market cap on the JSE. Once worth R4-trillion, the combined value of Naspers and Prosus is now about R2.4-trillion.
Considered among the most successful investments anywhere, the Tencent holding has long presented Van Dijk with a “problem” of how to close a valuation gap that means the markets ascribe virtually no value to the rest of the company’s businesses, though they are estimated to be worth as much as $50bn.
Since he took over in 2015, Van Dijk has faced pressure to deal with this financial inefficiency, prompting him to come up with a number of corporate actions, including buybacks, the listing of Prosus and acquisitions of e-commerce companies.
That has paled in comparison with China’s crackdown on the power of technology companies and their billionaire owners, culminating in December 2020 with the move against Ant.
Investors got a reminder on Wednesday of how Naspers fortunes are tied to Tencent, with the shares slumping after the Chinese company reported its slowest pace of revenue growth in almost two decades.
Revenue rose 8% for the three months to end-December — the first time that quarterly sales have grown by single digits. Online advertising sales missed analysts’ projections after they declined for the first time on record. Domestic gaming revenue grew a mere 1%, reflecting official curbs on playtime for minors.
Naspers shares closed 9.45% down at R1,689 and Prosus, which holds just under 29% of Tencent, fell 8.86% to R801.18.
With Bloomberg
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