Naspers: Taking care with Tencent
Amid the literal gloom of constant load-shedding sending SA into a new dark age, there was a shaft of light for investors as the Naspers⁄Prosus group announced its results and the market reacted with levels of enthusiasm generally reserved for a plucky Brit long shot closing out a tight five-setter on Centre Court at Wimbledon.
Naspers ended the day up 22.8% and Prosus up 18.9% to mark a reverse of fortunes after a pretty torrid six months for what had long been the JSE’s favourite share.
The most significant part of the announcement was the news that the group had abandoned its pledge not to flog any of its stake in Tencent, and with the blessing of Tencent it would be dribbling them out “regularly and in an orderly manner” to fund repurchases of its own stock. Bob van Dijk, the CEO of both companies, said this buyback programme could run for years and at a large scale, boosting the companies’ NAV and shrinking the discount to the group’s sum of the parts valuation.
Despite a turbulent operating environment, the group’s underlying operations performed well, with the e-commerce portfolio delivering revenue growth of 49%. Naspers invested $6.2bn to increase stakes in existing investments and in new investments that offer substantial opportunities, such as the $4.7bn purchase of India’s leading bill-processing company BillDesk. It expressed its horror at the war in Ukraine, and announced its intention to separate the Russian classifieds business, Avito, from its OLX group and exit the Russian business. The portfolio is broad and diverse, and remains full of opportunity.
Aston Martin: Running out of road
Back in February Aston Martin’s owner, Lawrence Stroll, who happens by extraordinary coincidence to be the father of its perennially unsuccessful Formula One driver Lance, was adamant that the business needed no additional funding. This appears to have been optimistic. The market pummelled a share price that was already down by two-thirds since the start of the year as news leaked that the luxury carmaker was in talks with Saudi Arabia’s Public Investment Fund to stick another £200m in the tank.
Aston Martin is famous for having gone bust an impressive seven times in its illustrious career, and 2020’s £1.3bn refinancing was intended to give it a bit of road to avoid reaching No 8. A great deal of hope was invested in the launch of its SUV, the DBX, and sales were up 60% in the first three months of the year. But the company is still guzzling cash like the DBX guzzles petrol, piling up £800m of losses in the past couple of years. The Saudis’ £200m would only just cover this year’s debt interest bill of £195m.
Customers who have ponied up a fairly full-throttle £2.5m for one of its Valkyrie hypercars are likely to be unimpressed by the fact that the company managed to deliver only 10 last year, of the 300 that are supposed to be produced, and it has burnt through three CEOs in the past two years. It is way behind the game as all its rivals move to electrification, and overall the road ahead looks full of potholes.
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