Naspers | Delivering evolution

Naspers will report FY'19 results on Friday, 21 June 2019. We expect core diluted HEPS to increase by 26% y/y to USD7.16ps (H1 accounting for 53%and H2 for 47%). Tencent's contribution will increase by 11% y/y, distorted by the decrease in Naspers' stake in Tencent post the disposal of 2% of Tencent in Mar'18. We expect negative ex-Tencent rump earnings of USD1.22ps, a 36% y/y decrease. The turnaround in the rump is due to Naspers' core investment focus, given the sale of Flipkart and with classifieds turning EBITDA positive during the year. Increased food delivery losses partly offset the positive rump turnaround as Naspers scales the segment.

Naspers made its third noteworthy announcement in the past year in Mar'18, announcing that all its ex-RSA internet assets would be listed on the Euronext Amsterdam. We do not believe the listing of NewCo will immediately address the discount to NAV (c.38.3%). However, the listing of NewCo highlights management's continued focus on reducing the discount. We expect further steps will include the listing of underlying operations like OLX. Moreover, we believe Naspers will give value back to shareholders by way of unbundlings, share buybacks and increased dividends. Ultimately, as management continues to demonstrate its ability to deliver more than its stake in Tencent through either disposals or profit growth, we expect the discount to narrow.