At a time when global markets are uncertain about China’s economic growth, Naspers and Prosus’s new boss is bullish about the Asian giant, saying the group is well positioned to continue capitalising on the large market and trends such as artificial intelligence (AI).
Naspers, valued at R762bn on the JSE, has many reasons for its loyalty to the Asian country.
Chinese internet giant Tencent was an incredible find for Naspers when it invested $32m for a stake that is now worth more than $100bn. It is considered one of the best investments in venture capital.
However, the Chinese economic miracle is facing uncertainty given slowing growth after decades of rapid expansion. All this has been worsened by high debt levels, a slowing in population growth and a slump in the property market that has weighed on investment and overall economic activity.
Against these odds, Naspers CEO Fabricio Bloisi is upbeat about the country’s place in his group’s portfolio.
“We just came back from China about three days ago. It’s good to be there to remind you that this is the biggest internet market in your world,” he told Business Day.
“Look at WeChat. That’s more than 1.3-billion people in one product. If you look to Tencent’s numbers more than the last three or four years... the numbers are improving year by year, revenue is improving, and profitability.”
Tencent is the owner of WeChat, the world biggest super app, a one-stop shop for instant messaging, gaming, payments, ride hailing and a number of other e-commerce applications.
“There is this ‘wonkiness’ [around China] because of the geopolitical situation. People are saying that there is an uncertainty about what’s going to happen, but our thesis is China is the number one market in the world, with the biggest number of customers,” Bloisi said, who has been at the helm since July.
“We are the biggest investor in the biggest and best company. This is amazing, that’s how we see it. The world is going through a transformation in AI, Tencent is one of the companies that is investing more in AI, with a very successful language model that is being used by many other companies.
“So I think we have a position that is very valuable, being a strong shareholder of a company that is strong.”
This comes as Naspers reported a more than 70% rise in core headline earnings at the halfway stage of its financial year, mainly driven by the improved profitability of the e-commerce consolidated businesses and equity-accounted investments, particularly Tencent.
Core headline earnings for the six months ended September rose to $1.5bn — an increase of 74%, while core headline earnings per share (HEPS) from continuing operations rose to 865c from 454c before.
The group uses core headline earnings as its measure of after-tax operating performance. HEPS from continuing operations jumped to 643c from 311c. E-commerce consolidated revenue grew 15% to $3.4bn, while international financial reporting standards operating profits totalled $107m after an operating loss of $426m in the prior period.
The adjusted earnings before interest and taxes for the e-commerce portfolio, previously known as trading profit, improved by $206m to $168m, as increased growth, innovation and focus positively impacted results, it said in a statement on Monday.
The intention is for Prosus to deliver revenue of $6.2bn, maintaining organic growth above 20%, and $400m in adjusted earnings before interest and tax from its e-commerce operations for the full year, a large improvement on the $38m reported in the previous financial year, it said.
Naspers shares had added a healthy 5.16% to their value by 3pm on Monday, at R4,277.81. The stock has had a good year through 2024, up 40.35% since January.
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