|
Related Topics |
|
A joint announcement by Naspers and MultiChoice in SENS today made it clear that Naspers will be unbundling MultiChoice to shareholders during the first half of 2019.
|
|
Background on Naspers and MultiChoice
NASPERS
Founded in 1915, Naspers is a global internet and entertainment group and one of the largest technology investors in the world, operating some of the world's leading platforms in internet, video entertainment and media. Today, Naspers invests and operates in more than 120 countries and markets that the group believes have long- term growth potential, including China, Central and Eastern Europe, Russia, Africa, North America, Latin America, India, Southeast Asia and the Middle East. Naspers seeks to address big societal needs through technology by identifying changes in consumer behaviour early and building businesses that have scale, are profitable and generate healthy cash flows.
The group's principal operations are in internet services and ecommerce (in particular, online classifieds, payments, online food delivery, etail, and online travel services) and media. The companies that Naspers has built, acquired and invested in are leaders in many of their markets, connecting people to each other and the wider world, and helping them improve their daily lives. In the financial year ended 31 March 2018, the Naspers Group revenue, measured on an economic interest basis, was US$ 20.1 billion, the trading profit was US$ 3.4 billion and core headline earnings were US$ 2.5 billion. Naspers executed well in the first half of the 2019 financial year, with Group revenue, measured on an economic interest basis, of US$ 11 billion, trading profit of US$ 2 billion and core headline earnings of US$ 1.7 billion.
The Naspers Group's major listed associate investments include its 31.2% effective interest in Tencent Holdings Limited, the leading provider of internet and mobile telecommunication services in China, its 28.4% effective interest in Mail.ru Group Limited, one of the two leading internet, entertainment and social network platforms in Russia, its 43.1% effective interest in MakeMyTrip Limited, one of the largest online travel groups in India, and its 22.8% effective interest in Delivery Hero GmbH, a global leader in online food ordering.
MULTICHOICE
MultiChoice, its subsidiaries, affiliates and associates ("MultiChoice Group") is one of the leading video entertainment operators on the African continent, and one of the fastest growing pay-TV broadcast providers globally, entertaining 13.9 million households (as at 30 September 2018) across 50 countries. Its carefully curated local and international content is distributed across multiple platforms, including digital satellite and terrestrial television, as well as through OTT solutions. The MultiChoice Group is structured around the following three business segments: - South Africa, the MultiChoice Group's division that offers digital satellite television and subscription video-on-demand services to 7.2 million subscribers in South Africa (as at 30 September 2018). Connected Video, which forms part of the South Africa segment from a financial reporting standpoint, delivers online video entertainment services to subscribers; - Rest of Africa, the MultiChoice Group's division which offers digital satellite, online services and digital terrestrial television services to 6.7 million subscribers across Africa (as at 30 September 2018); and - Technology, which includes the MultiChoice Group's leading digital platform and application security division, Irdeto.
Founded in 1915, Naspers is a global internet and entertainment group and one of the largest technology investors in the world, operating some of the world's leading platforms in internet, video entertainment and media. Today, Naspers invests and operates in more than 120 countries and markets that the group believes have long- term growth potential, including China, Central and Eastern Europe, Russia, Africa, North America, Latin America, India, Southeast Asia and the Middle East. Naspers seeks to address big societal needs through technology by identifying changes in consumer behaviour early and building businesses that have scale, are profitable and generate healthy cash flows.
The group's principal operations are in internet services and ecommerce (in particular, online classifieds, payments, online food delivery, etail, and online travel services) and media. The companies that Naspers has built, acquired and invested in are leaders in many of their markets, connecting people to each other and the wider world, and helping them improve their daily lives. In the financial year ended 31 March 2018, the Naspers Group revenue, measured on an economic interest basis, was US$ 20.1 billion, the trading profit was US$ 3.4 billion and core headline earnings were US$ 2.5 billion. Naspers executed well in the first half of the 2019 financial year, with Group revenue, measured on an economic interest basis, of US$ 11 billion, trading profit of US$ 2 billion and core headline earnings of US$ 1.7 billion.
The Naspers Group's major listed associate investments include its 31.2% effective interest in Tencent Holdings Limited, the leading provider of internet and mobile telecommunication services in China, its 28.4% effective interest in Mail.ru Group Limited, one of the two leading internet, entertainment and social network platforms in Russia, its 43.1% effective interest in MakeMyTrip Limited, one of the largest online travel groups in India, and its 22.8% effective interest in Delivery Hero GmbH, a global leader in online food ordering.
MULTICHOICE
MultiChoice, its subsidiaries, affiliates and associates ("MultiChoice Group") is one of the leading video entertainment operators on the African continent, and one of the fastest growing pay-TV broadcast providers globally, entertaining 13.9 million households (as at 30 September 2018) across 50 countries. Its carefully curated local and international content is distributed across multiple platforms, including digital satellite and terrestrial television, as well as through OTT solutions. The MultiChoice Group is structured around the following three business segments: - South Africa, the MultiChoice Group's division that offers digital satellite television and subscription video-on-demand services to 7.2 million subscribers in South Africa (as at 30 September 2018). Connected Video, which forms part of the South Africa segment from a financial reporting standpoint, delivers online video entertainment services to subscribers; - Rest of Africa, the MultiChoice Group's division which offers digital satellite, online services and digital terrestrial television services to 6.7 million subscribers across Africa (as at 30 September 2018); and - Technology, which includes the MultiChoice Group's leading digital platform and application security division, Irdeto.
Effects of the unbundling on Naspers
So what is the impact of the unbundling of MultiChoice on Naspers? Well to be honest it is absolutely minimal. Showing just how big Naspers other businesses such as Tencent is when removing MultiChoice from their total earnings makes almost no difference to Naspers' earnings.
Below the pro forma financial effects as published by Naspers (NPN) on SENS today. The figures in parentheses is after removing MultiChoice from NPN's earnings
So Naspers diluted headline earnings per share is a mere 5 US cents lower without MultiChoice in Naspers earnings.
So what is MultiChoice's earnings like? In the past it has been very hard to gauge the potential and value of MultiChoice due to it forming part of Naspers' earnings. But in their pre listing statement pro forma financial results have been published. We take a look at their pro forma financials below.
Below the pro forma financial effects as published by Naspers (NPN) on SENS today. The figures in parentheses is after removing MultiChoice from NPN's earnings
- EPS (US cents) :792 (788)
- Diluted EPS (US cents) : (783) ( 779)
- HEPS (US cents) : 640 (636)
- Diluted HEPS (US cents) : 632 (627)
- Core HEPS (US cents): 385 (362)
- NAV (US cents): 6 208 (6 113)
- TNAV (US cents): 5 435 (5 413)
- Issued share capital: 438 656 000 (438 656 000)
- Issued share capital net of treasury shares: 431 943 000 (431 943 000)
- Weighted average number of shares in issue : 432 126 000 (432 126 000)
- Diluted weighted average number of shares in issue: 433 522 000 (433 522 000)
So Naspers diluted headline earnings per share is a mere 5 US cents lower without MultiChoice in Naspers earnings.
So what is MultiChoice's earnings like? In the past it has been very hard to gauge the potential and value of MultiChoice due to it forming part of Naspers' earnings. But in their pre listing statement pro forma financial results have been published. We take a look at their pro forma financials below.
So while MultiChoice has seen strong subscriber numbers growth over the last three years, infact 29.4%, while revenue over the same period only grew by 1.4%. Their trading profit margins are in decline too. But looking at the number of shares MultiChoice plans on issuing, their trading profits and placing a PE ratio of 15 on MultiChoice shares, it will give the company a valuation of R94.8 billion (which will make MultiChoice the 21st largest firm listed on the JSE) or around R211 a share
Note we do not think that MultiChoice will trade at a PE of 15. We merely used it as a benchmark PE ratio as it is close to the overall market average. We believe in the long run MultiChoice group will trade at a PE of around 8, due to the struggling segment they are operating in. Competition from online pay per view companies such as Netflix eating into their subscriber base. At a PE of 8 we see them trading at around R112 a share.
But dont be surprised if on listing the price surges as large funds tracking the Top 40 (and dont have a lot of exposure in NPN) needs to buy the share to have it in their funds. A gradual decline after the feeding frenzy mayhem of listing will then probably set in and MCG we predict will be trading at a PE of around 7/8 a few months after listing.
Note we do not think that MultiChoice will trade at a PE of 15. We merely used it as a benchmark PE ratio as it is close to the overall market average. We believe in the long run MultiChoice group will trade at a PE of around 8, due to the struggling segment they are operating in. Competition from online pay per view companies such as Netflix eating into their subscriber base. At a PE of 8 we see them trading at around R112 a share.
But dont be surprised if on listing the price surges as large funds tracking the Top 40 (and dont have a lot of exposure in NPN) needs to buy the share to have it in their funds. A gradual decline after the feeding frenzy mayhem of listing will then probably set in and MCG we predict will be trading at a PE of around 7/8 a few months after listing.