Naspers gains over 22% in past 16 weeks
DURBAN – Naspers's has outperformed the South African equity market over the past 16 weeks, gaining more than 22 percent, positively impacted by Tencent, which was up 30 percent during the period.
Naspers has a 31 percent stake in Tencent through its subsidiary, Prosus, its international consumer internet division.
Prosus had surged more than 32 percent to R1 557.51 a share as of Friday afternoon, up from R1 054.73 since the beginning of March, while Naspers has risen to R3 076.48, up from R2 380.94 in the same period.
Peter Takaendesa, the head of equities at Mergence Investment Managers, said on Friday that, from the beginning of March to Friday, Naspers has significantly outperformed the South African equity market, although it has significantly underperformed its investments in Prosus and Tencent.
“The strong performance of Naspers and Prosus shares has largely been driven by their investment in Tencent, which is up more than 30 percent in rand terms during this period.
“However, Tencent and many other large global technology stocks have not been immune to the impact of Covid-19, but some of their products and services, such as online gaming and shopping, have benefited from restricted human movement during and after lockdowns,” Takaendesa said.
He said the sector was, therefore, less affected by Covid-19 compared with sectors that require the physical movement of goods and services.
“The weaker rand over the period has also benefited Naspers and other rand hedges that are less affected by Covid-19. As lockdowns have been easing across many global markets while global central banks have continued to inject unprecedented liquidity into their markets, investors have started to shift away from the stocks that benefited to those that suffered the most from Covid-19 lockdowns,” he said.
The rand has weakened from R15.77 at the beginning of March to about R19.26 against the dollar on April 5 at the height of the lockdown in South Africa. However, it had recovered to R17.31 on Friday afternoon.
Takaendesa said, however, that fears about a second wave of the pandemic were putting question marks on that rotation on the basis that earnings recovery in sectors most affected by the Covid-19 could take much longer if any form of the second wave of Covid-19 limits the recovery in physical distribution channels disrupted by the first wave of the virus.
Naspers and Prosus released their trading updates for the year to the end of March after the close of the market on Thursday.
Naspers expects its core headline earnings per share from continuing operations to decline by between 1.2 percent and 7.7 percent, down from last year's reported core headline earnings per share of 687 US cents (R118.76). Prosus expected its core headline earnings per share to increase by between 3.7 percent and 12.1 percent, up from last year’s 190 US cents. Naspers and Prosus use core headline earnings as an indicator of their operating performance.
Both companies expect to release their results on June 29.