Buy: Naspers
Naspers revolves around investment in Prosus, which holds a significant share of Chinese tech giant Tencent alongside a complementary portfolio of e-commerce assets focusing primarily on food delivery and classifieds advertising. Under new CEO Fabricio Bloisi, the group has prioritised improving shareholder returns through portfolio optimisation and integration. This strategy includes creating synergistic ecosystems in the key geographies of Latin America, Europe and India, alongside share buybacks aimed at narrowing the 42% discount to the underlying NAV. Year to date, Naspers is down about 18% as Tencent has sold off heavily on concerns over global tech valuations and the growth trajectory of the Chinese gaming sector. However, Tencent’s fundamentals remain strong as a leader in Chinese gaming and social media. In a recent letter to shareholders, Bloisi reiterated the group’s focus on portfolio rationalisation and continued buybacks, noting that no major acquisitions are planned for the short term. The recent share price pullback creates an attractive entry point into a portfolio of world-leading e-commerce assets trading at a steep discount, with a clear path to value realisation over the medium term.
Sell: Salesforce
Salesforce is the world’s leading software supplier of customer relationship management and related applications focused on sales, customer service, marketing automation, analytics and application development. About 65% of its sales originate in the US. Software services businesses that provide routine enterprise systems are particularly vulnerable to the disruptive potential of AI. This is evidenced by the accelerating investment in AI by hyperscalers racing to capture this new market. AI agents, in particular, are being developed to replace the routine tasks that human workers currently perform using enterprise systems such as Salesforce. In addition, large enterprises are investing heavily in integrating AI into their core business processes, effectively crowding out investment in traditional enterprise systems. This shift is expected to lead to a further slowdown in revenue growth for enterprise system providers. Equity market investors have already begun selling shares in Salesforce and other enterprise software providers as the disruptive force of AI becomes a reality. Notwithstanding the recent sell-off, Salesforce shares trade at a high earnings multiple of 24 and may derate further as sales growth slows in the face of the AI onslaught.
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