You are currently viewing our desktop site, do you want to visit our Mobile web app instead?
 Registered users can save articles to their personal articles list. Login here or sign up here

Trading idea: It might just be time to short Naspers

Traders need to decide if they should fight the trend.

Traders on the JSE are facing an emotional dilemma: should they decide to take a bet that shares in JSE-listed media group Naspers are going to fall from R2 000? 

The company has been an excellent investment, having returned 82% over the past 12 months. However the psychological R2 000 per share mark is proving a tough nut to crack, especially with concerns that Chinese subsidiary Tencent has been overpriced and that the market may well be suffering from Naspers fatigue.  

Asset manager Vestact makes the point in a recent note to clients: 

“Take the Tencent market cap in Hong Kong, which right now is 1.58 trillion HKD. Naspers owns 33.85% of TenCent, that translates to 534 billion Hong Kong Dollars. One Hong Kong Dollar at the current exchange rate is 1.56 rand. So, quite simply, multiply 534 billion HKD by 1.56 and that equals 834.8 billion rand. Naspers had a market capitalisation of 813 billion rand at the open today, up 3.7% as I write this in early morning trade which equals 843 billion rand. The difference between what the stake in Tencent is worth, relative to what the JSE buyers are willing to pay is roughly 8 billion rand.

“Effectively, the South African asset management community is telling you that the people of Hong Kong, or the folks valuing Tencent on a 53 multiple are overpaying. With growth rates in the mid 30s, the PEG ratio is somewhere in the region of 1.43 times, which is starting to reach expensive levels.” 

Stockbrokerage Imara SP Reid made a similar point with the share hit R1 198 last year and valued the share as “fully valued” and noted in a November 2014 note: “In our view the current results and ROE [return on equity] of 11% are, simply put, not good enough for the current stock price. “ 

According to analyst consensus forecast on FT.com, the share will “outperform” the market according to views from 18 polled analysts.

Naspers has been driven by a surge in Chinese stocks but analysts are raising concerns that equity markets are overcooked and it may pay to err on the side of caution in China. 

Brought to You By Saxo Bank

Bottom Banner

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   3

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

It is never a good idea to go against the trend. Just have a look at the research they have done on EasyStockPicker.co.za

Why not wait for Tencent to tank ? You timing will be off on Naspers. It’s a pure blue chip share with a ton of momentum behind it.

It is a momentum stock when it rolls it rolls. Up and down, agree wait for ten cent to tank, Naspers will correct and then buy into weakness.

Load All 3 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: