Naspers lines up $8.2 billion war chest to scale up tech ventures

By Tiisetso Motsoeneng

JOHANNESBURG (Reuters) - Naspers plans to deploy its $8.2 billion war chest to step up growth in its e-commerce ventures, its chief executive said on Friday, part of a push to cut the company's dependence on its Chinese money spinner Tencent.

Founded more than 100 years ago in Stellenbosch, South Africa, Naspers has transformed itself from a newspaper publisher into Africa's biggest company, a $104 billion behemoth with private equity-style investments in e-commerce platforms such as auction sites, classified and online retail.

Naspers owes its hefty valuation to a 31 percent stake in Tencent, which is worth $149 billion, or roughly 40 percent more than Naspers. The discount has prompted some investors to urge Chief Executive Bob van Dyk to find ways to narrow it.

Van Dyk, at the helm since 2014, has ruled out spinning off the Tencent stake, saying the discount would be closed when the company's other e-commerce ventures swing into profit.

"We will use our strong balance sheet to accelerate the growth of our classifieds, food delivery and fintech businesses globally," van Dyk said in a statement. "Also to pursue other growth opportunities when they arise."

While the cash will be used primarily to grow existing businesses, he said, it could also be used for mergers and acquisitions.

Naspers netted $1.6 billion from the sale of its 11 percent stake in Indian e-commerce start-up Flipkart in May, almost two months after raising around $10 billion from the sale of a 2 percent stake in Tencent.

INVESTORS' SKEPTICISM

The discount gap between its market value and that of Tencent has been widening over the last year, confirming investors' concerns that van Dyk and his team are not creating value with the company's other businesses.

"The problem is people are increasingly seeing Naspers as a proxy to Tencent," one Johannesburg analyst said, who declined to be named because they are not allowed to speak to media. "Until we see these e-commerce businesses actually contributing meaningfully to the bottom line the problem won't go away."

Naspers said its e-commerce division, which excludes Tencent and houses assets such as OLX, the biggest classifieds site in India and Brazil, narrowed its core losses, or losses on the EBITDA level, by 10 percent to $615 million.

"We're incredibly excited by the performance of the e-commerce segment, not only losses narrowing but also the acceleration of the top line," chief financial officer Basil Sgourdos said in telephone interview.

The business grew its top line by 36 percent to $3.6 billion rand in the year to end March, a similar contribution to the group's $20.1 billion total sales from its de facto African pay-TV monopoly, Multichoice.

Naspers' problems mirror the dilemma faced by Yahoo, where its core business ended up being worth 10 times less than its stake in Alibaba and Yahoo Japan.

Yahoo fixed that by selling its core operating business to Verizon in 2016 and re-branding what was left as Altaba, a conflation of 'alternative' and 'Alibaba'.

Naspers also reported a 72 percent rise in core headline earnings to $2.5 billion, or 581 cents per share, in the year ended March compared with $1.5 billion, or 337 cents per share, a year ago.

Core headline EPS is Naspers' main profit measure that strips out non-operational and one-off items.

Shares in Naspers rose 3.1 percent to 3,307 rand as of 1501 GMT, outpacing a 1.1 percent rise in the blue-chip JSE Top-40 index.

(Reporting by Tiisetso Motsoeneng; Editing by James Macharia and Jan Harvey)