From a Morgan Stanley research report on other companies besides Naspers, from 25 June 2018. This copy/paste is going to look somewhat messy, but it would take me forever to clean it up:
Naspers (OW PT ZAR 5400)
Naspers reported a solid set of numbers with strong revenue growth and improving trading
profit in the key verticals. Whilst revenue growth is more important given early growth
stage of its core businesses, the improvement in trading profit was behind our expectations.
See our 1st take
here
. We lay out the key questions for the conference call on Monday:
Operational & financial questions:
Strategic questions:
Classifieds:
OLX turned profitable this year, but profits were significantly lower in
H2 vs. H1, why the decline since revenue growth remained strong? Has monetization
in Brazil had an impact on user engagement (MUL & MAU growth was behind
Avito's despite less mature market)? What does the path towards monetization
look like for let go? Has it seen an impact from Facebook's entrance in the space this
past year?
Payments:
PayU numbers in India look particularly strong with an 84% increase in
total payment value. How has the relatively new Unified Payments Interface
impacted PayU's business? Has PayU started to benefit from the relationship with
Kreditech after Naspers' investment?
Food:
How much of the growth in iFood is driven by Brazil? Why not drive
consolidation in Latam with Delivery Hero? In India Zomato has also raised a
considerable amount of capital, can both grow side-by-side?
PayTV
: Now that the Naira has stabilized, can we look forward to losses in SSA
shrinking? When does it believe it can reach break-even?
A negative change in
working capital
of $255m drove FCF losses to increase to
$(242)m relative to last year. We had hoped for some reversal in H2. How should
we think about this going forward?
The
discount
remains stubborn at c.40% despite asset sales, strong revenue
growth, improvement in profitability and better disclosure. What is the company
doing to try to narrow this discount rate?
At the CMD Naspers said that it was considering share buybacks, listing additional
companies or additional listings for Naspers. Is it still considering all these options?
Under what conditions will it do a
share buyback
, if any? Why has it not chosen to
do a buyback after the Tencent or Flipkart sales given the high discount rate?
What is the environment for
acquisitions
in its three key target verticals? Food,
classifieds, Fintech? In the past most acquisitions have not exceeded a few hundred
millions. Given its greater headroom today, should we expect larger ticket sizes?
In food, whilst Naspers has a controlling stake in Movile (which controls iFood), it
only has minority stakes in Delivery Hero and in Swiggy. Given its firepower after
the Tencent sale, what was behind the decision not to be a larger participant in the
most recent Swiggy funding round, for example ($210m raised, Naspers contributed
$80m)? Can Naspers help drive consolidation in the space without controlling the
companies?
In classifieds, will the focus for acquisition be in consolidating markets, extending
the business model, or expanding geographically?
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