The Naspers stable added R131bn in value on the JSE last week, driven by new gaming releases in China, a big piece of business for its biggest earner, Tencent.
Chinese tech giant Tencent announced last week the early release of a highly anticipated mobile game, Dungeon & Fighter Mobile in China. This earlier release date has investors excited about the potential revenue boost for Tencent and could signal a turnaround for their gaming sector.
There have been signs that the Chinese government might be easing its grip on tech companies, seen as positive for the industry. This could lead to increased investment in Chinese tech stocks, including Tencent.
China is the biggest online gaming market, with Tencent being the world’s largest video games company responsible for titles such as Honor of Kings and PUBG Mobile. The Chinese internet giant also owns large game developers, including Riot Games and Epic Games, the makers of Fortnite.
The 13.04% gain in Tencent shares last week, accounts for the majority of the stock’s 17.46% rise since the start of the year. That action helped to prop up shares for the Naspers stable. Naspers was up 7.7% last week, while Prosus, which actually holds the Tencent stake, was up 5.47%.
Naspers is up almost 24% year to date.
Tencent has been reeling from a crackdown on Chinese technology companies that has hurt its gaming unit over the past few years.
The new gaming rules in China would have limited in-game purchases, including cracking down on incentives such as daily log-in rewards. A pop-up warning players of “irrational” spend had also been proposed.
Prosus lost almost a fifth of its value in 2021, wiping off more than R400bn as investors continued to worry about the safety of their capital in the Asian country.
Players positive
Earlier in 2024, there were hints that gaming regulators in China were softening their stance when draft rules to control spending on video games were taken down from the National Press and Publication Administration website.
Despite the uncertainty that has characterised China’s tech sector in recent years, market players are still positive about Tencent’s prospects.
In a recent investor note, Sanlam Private Wealth’s Christiaan Bothma said: “We see Tencent as one of the world’s truly great businesses, with a strong management team and some of the best sustainable competitive advantages globally. In fact, no single Western company can compare adequately to Tencent. Its largest asset is its user base of 1.3-billion on WeChat.”
“The runway for long-term growth is decidedly healthy, with Chinese consumers probably growing ahead of the rest of the economy for the foreseeable future.”
With China and its erratic regulatory regime having hurt the group’s prospects in recent years, it has turned much of its attention to the world’s second-most populous country, India, where Naspers has been a big tech investor for more than a decade.
Prosus-owned fintech provider, PayU, has received in-principle authorisation from the Reserve Bank of India to operate as a payments aggregator under the country’s Payment Settlements Act of 2007. With this approval, PayU can start onboarding new merchants on its platform.
In early 2023, Naspers’ Amsterdam-listed subsidiary agreed to sell PayU’s Global Payments Organisation to UK-based Rapyd for $610m cash (about R11bn at the time) as part of efforts to streamline the group’s fintech operations, with a primary focus on the Indian market.
The group says PayU, wholly owned by Prosus, will be profitable by the end of the financial year ended March, making it a prime target for a stock market flotation.
India accounts for about a fifth of Prosus’ portfolio.
Movements in China remain the biggest driver of sentiment and price moves in Naspers and Prosus stock.
By close of trade on Friday, Naspers was up 1.38% to R3,624.61 and Prosus added 1.32% to R636.75.
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