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Naspers and Investec battle it out over "damaging" report

By Staff Reporter Time of article published Feb 6, 2018

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CAPE TOWN - Multinational media group, Naspers is requesting asset management company, Investec to retract an analyst report that allegedly contains errors and has subsequently damaged the media groups’ market value and its shareholders. 

In a note dated back to January 22, seen by Bloomberg News, Investec analysts David Smith and Thapelo Mokonyane said Naspers should be valued at a 30% discount to its assets. 

They attributed this observation to a slight increase in the number of outstanding shares over 11 years. 

Also, taxation issues and costs associated with financial transactions, these are referred to in the report as friction costs. 

“While we believe that everyone is entitled to their views, the Investec report on Naspers contains factual inaccuracies and misleading information”, said the head of investor relations at Naspers, Meloy Horn.

“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.”

Meanwhile, Investec and the analysts 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 collapsed by more than 16% since the release of the damning report and is now trading at a four-month low. 

Approximately R200bn has been removed from the value of the company in six consecutive trading days of declines. 

Notably, the shares traded 3.9% lower at R3 120 at the close in Johannesburg on Monday. 

This left the company’s value at nearly 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.

“We saw some other brokers reducing their price targets on Naspers".

Naspers has previously traded at a discount to its 33% stake in Chinese multinational, Tencent Holdings. 

Chief Executive Bob Van Dijk has reportedly been looking for new investments to recreate 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. 

Also, Tencent has declined 2.5% since January 22 which may have contributed to Nasper’s fall. 

Nasper’s share dilution over the past 11 years has averaged about 0.9% a year and not 1.9% as the analysts have calculated. 

The benefit of owning the Tencent stake has not been affected by the release of new shares and the company is reportedly ending its policy of paying compensation with stock plans as historical awards have been paid out. 

In addition, it has been reported in December last year that Naspers downward share price was the biggest weight on the all share index. 

The drop in the Naspers’ share price and a stronger rand impacted on the all share index on the JSE as it lost its upward momentum of the last two weeks in December.

This, despite a strong surge in US share prices as the Dow Jones industrial average, had broken through the 24000 level for the first time.

Just after the close of the JSE in December, the Dow had broken through the 24300 points level. This sharp increase was mostly down to investors welcoming the signs that the odds were improving for the Republican-led effort to forge a sweeping tax overhaul bill.

Downward movements in Tencent, Naspers’ affiliate company in China, had caused the JSE-listed company’s share price to fall by R558.38 (13.65%), since its record close of R4090 on November 21. Naspers closed at R3531.62 at that time period. 

Due to this strong drop in Naspers shares, as well as the stronger rand, the all share index on the JSE ended 1.4% lower at 59449.38 points in late November.

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