MCG | The African Turnaround
Naspers will be listing the Multichoice Group (MCG) on 27 February 2019 and unbundling the MCG shares to Naspers shareholders on 4 March 2019. We view this as a milestone event, with Multichoice SA providing over USD3.6bn of dividends to Naspers over the past ten years, enabling Naspers to invest into international internet assets. We estimate that MCG will report core HEPS of 517cps for FY'19. However, the core HEPS number understates the longer-term profits of MCG due to historic interest charges to September 2019 and ZAR 3.5bn of EBITDA losses in Africa.Initially, we expect the share to trade at a discount to our fair value (c.50%+) given foreign and BEE shareholder overhangs, and concerns around OTT competition and regulation. However, in our view MCG has a strong growth trajectory over the next five years (core HEPS five-year CAGR: +32%).
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