The success of Tencent, Naspers and Prosus and being permanently tied to trials and tribulations put pressure on the JSE after Tencent announced disappointing results on Wednesday.
Naspers fell nearly 5% to close just below R1 600 per share, while Prosus lost about 3% to close at R756.
Analysts at financial news service Bloomberg noted that Tencent used its online chat application WeChat to earn its slowest revenue on record after launching new internet games and restricting money transfer investigations by the Chinese government.
“Sales have just risen to 135.5 billion yuan ($ 20.1 billion) in the three months ended March, missing the average forecast, after online advertising revenue fell 18%. According to Bloomberg, overall growth slowed for the seventh consecutive quarter, at the lowest pace since the Shenzhen company went public in 2004.
Although the fall in Naspers and Prosus prices on Wednesday has caused a loss of billions of rand in terms of market capitalization, the damage to the two listed companies since the Chinese government began taking a tough stance on operations is significant. The aspirations of big IT companies.
Tencent has fallen nearly 40% in the last 12 months on the Hong Kong Stock Exchange, from above HK $ 600 on Tuesday to above HK $ 365.
However, it is equally significant to note that Tencent has enriched investors, gaining more than 45,000% since enrollment.
The same is true of the Naspers, which are currently 50% lower than the R3 128’s annual high. It has also enriched investors since its listing in 1994 – at some R17 per share.
The expanding newspaper and printing business was booming at the time, with some promises of its first interest in the then revolutionary Internet industry. Early investors should keep in mind M-Cell, MTN and Mweb before investing in Tencent.
The restructuring of Naspers and the listing of Prosus have unlocked some value for Naspers shareholders, but have recently suffered due to a change in the attitude of investors towards Prosus and Tencent. Prosus is down 48% from its annual high.
Hold on or buy?
Despite the volatility in the share prices of Naspers and Prosus, analysts mostly agree that both stocks are priced.
Both trade up to 50% off the value of their underlying investment, mostly Tencent. The shares not only offer cheap access to Tencent, but also give easy exposure to a huge global online group by buying a ‘local’ share on the JSE.
Andrew Dietburner, chief investment officer at Old Mutual Wealth Private Client Securities, said in a recent comment that Naspers and Prosus should be seen as volatile in the face of a serious downtrend going back to January 2021.
“Importantly, Tencent – and the association Naspers and Prosus – are not alone, as it has sold a wide range of Chinese technologies, suggesting that this is not a fundamental issue for individual companies,” Ditburner said.
“Rather, the concerns and geopolitical risks surrounding the regulatory environment are at the forefront of investors’ minds and how they can influence the long-term outlook for business.
“Given the protracted nature of this uncertainty, it seems to me that market participants are deeply disturbed by any negative news, word or signal that is being expressed.
“Thanks, we’ve been here before,” he said at the time, adding that Tencent had recovered from previous sales.
Naspers and Prosus will release their results for the fiscal year ending March 2022 in the next few weeks, giving investors more insight into the rather interesting developments in China as well as the impact of the ongoing Russia / Ukraine war.
Listen to this MoneywebNOW podcast with Shawn Knitting and Simon Brown from Morningstar where the Naspers are behind the sale (or read the transcript):