Ricus Reeders, portfolio manager at PSG Wealth, said while the short-term technical picture looks great, he will not touch Naspers long term because of its exposure to Tencent.
Naspers released its results for the first half of the year on 23 November, which revealed that group revenue increased by 9% to US$17 billion.
Group trading profit declined by 38% to US$1.4 billion, reflecting a lower contribution from Tencent and investment in eCommerce extensions. Core headline earnings were down 51%.
Naspers CEO Bob van Dijk said their open-ended buyback of Prosus and Naspers shares is unlocking value.
“We expect the benefits of the programme to compound over time. Looking ahead, we will simplify the group’s structure to crystallise value from our portfolio,” he said.
Despite Naspers and Prosus’ diversified portfolio of Internet companies, the reality is that Tencent dictates their performance.
Prosus, and through it Naspers, is the biggest Tencent shareholder and the Chinese technology and entertainment giant is responsible for most of their profits and share movements.
The Tencent share price has increased by 32% over the last month, which resulted in Naspers’ share price increasing by 42%.
Commenting on the recent Naspers results and the share price increase, Reeders said if you are a shareholder, the short-term technical picture looks great.
“The Naspers share price is going up, and I would not sell right now,” he said, speaking on Business Day’s Stock Watch.
However, long-term, while Naspers remain invested in Tencent, he would not “touch it with a barge-pole”.
“Tencent, as a Chinese company, is under the direct control of President Xi Jinping, who can change his mind at any time,” Reeders said.
“He is a complete dictator as far as China is concerned, and he does not worry about investors. He is in total control of companies foreigners are invested in.”
What remains of Naspers other businesses, Reeders is not convinced it is the best tech sector to be in.
“For the moment, stay with the price momentum. However, when the Naspers share price shows weakness, you must be very aware of the Tencent risk.”