From the bottom of the following Morgan Stanley report: Naspers will report FY18 Results on Friday, 22 June at 15:00 South African time (13:00 GMT, 15:00 CET, 09:00 US Eastern time).
Section of Morgan Stanley European Internet research report 18 June 2018: Naspers FY Results (Overweight, PT ZAR 5400)
We expect strong pro forma revenue growth in eCommerce to have continued. We also
look for better profitability at both Pay TV and eCommerce, helped by better FX and lower
development costs, respectively. We will look for details on remuneration changes but
don't expect any meaningful shifts in corporate structure.
We will focus on three things:
1. eCommerce constant FX revenue growth.
Changes in consolidation and FX make
accurately forecasting revenue here a challenge. We focus on sequential trends on
pro forma constant FX growth. In H1 the company delivered 38% growth and we
would expect similar growth. Reported numbers are impacted from the
deconsolidation of Allegro but should start to incorporate the benefit from the
consolidation of Takealot and the acquisition of Delivery Hero.
2. Better operating profit in PayTV and eCommerce.
South Africa should have
continued to benefit from the strengthening ZAR, which should drive an
improvement in PayTV operating profit even if we expect Sub-Saharan operating
profit to be in line with last year. The stabilisation of the currency should finally
drive
an improvement in FY19. H2 is seasonally a weaker quarter for Pay TV so we
forecast $122m, still up substantially from $61m last year. We expect losses in
eCommerce to continue to contract and forecast $(177)m in H2 (vs. -$318m in H1,
$439m in H217). On an economic interest basis, we forecast operating profit of
$2.4bn for the group, significantly ahead of last year at $0.85bn.
3. The company has already reported headline core HEPS 40-45% ahead of last year.
We highlight that this number is dominated by Tencent and, without more detail, it is not
possible to reconcile it with forecasts for the core businesses. We therefore think this
number is useless in the purpose of evaluating the trajectory of the core without any
further details.
We do not expect meaningful technical changes, but we look forward to hearing about
the new remuneration policy.
The company changed the head of its remuneration
committee earlier this year. Investors had hoped for a change that would tie the
remuneration to the discount, but we think it is more likely we'll see a halfway solution
that gives more weight to performance at the underlying assets but still incorporates a
link to the Naspers share price.
Naspers will report FY18 Results on Friday, 22 June at 15:00 South African time (13:00
GMT, 15:00 CET, 09:00 US Eastern time). There will be a conference call on Monday, 25
June at 16:00 South African time (14:00 GMT, 16:00 CET, 10:00 US Eastern time). Dial in
details (code 13694# for all) - UK: +44 203 608 8021, USA: +1 412 317 0088, South Africa
and other: +27 10 500 4108.
3. FCF generation.
In H1 the better operating profit was then offset by a significant
working capital swing of $(239)m on a combination of investment in set-top-box
inventory, investment in eTail inventory ahead of seasonal sales events, and pre-
payments on renewal of sports rights. We are not aware of any significant one-offs
coming through this period. |
