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.
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