Peter Takaendesa, chief investment officer, Mergence Investment Managers
Buy: Naspers
There is potential for 30%-50% upside in this technology conglomerate driven by resilient double-digit earnings growth and a potential multiple rerating when Tencent launches more AI products that integrate with WeChat later this year. AI spend concerns are likely to ease over the medium term as Tencent and Naspers have diversified underlying revenue streams, including online games, advertising, fintech and other undermonetised products that leverage a user base of more than 1.4-billion. Profit-taking in global large-cap tech shares, starting late 2025, and competition concerns in food delivery have driven this profit-taking in Naspers after a solid outperformance for most of 2025. Our view is that Naspers shares are now attractively valued at a 40%-50% discount to NAV and are backed by high-quality investment platforms with solid underlying assets. Tencent is growing core profit at three times China’s GDP growth with AI-driven efficiencies in existing consumer products and new revenue streams’ optionality over the mid to longer term. Tencent is also now trading at the low end of its valuation range while its balance sheet is in a net cash position. Further, ongoing share buybacks at Naspers remain accretive, and valuation is attractive compared to global peers and other growth assets listed on the JSE.
Sell: Vodacom
The cellular services giant sits on a valuation that looks full — especially with its key South African market looking tougher. In fact, Vodacom’s core South African mobile business is likely to remain under pressure from intensifying competition in the prepaid market while balance sheet gearing is now higher after several expensive acquisitions, including Maziv and a recent additional 20% stake in Safaricom. South African business remains the largest contributor to group profits, and the latest revenue growth from this unit was a mere 1.4% due to competition in the prepaid market from mobile virtual network operators through Cell C, MTN fighting to regain lost share, and Telkom Mobile continuing to gain market share. Interest cost on the additional debt taken is not tax deductible. We agree with Vodacom’s strategy to diversify away from tougher South African mobile operations, but it will take time to materially reduce its contribution on a proportional attributable basis. That also comes with a higher risk of currency devaluations and regulatory issues in other African countries in future. Vodacom is now trading at a 20% premium to its five-year average multiple despite increasing exposure to higher-risk rest of Africa operations and the key South African business getting tougher.
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