Naspers FY19 results: what will it mean for Naspers and Tencent share prices?

When is Naspers’ earnings date?

Naspers, the global internet and entertainment group and one of the world’s largest technology investors (with major holdings in companies such as Tencent and Mail.ru), is set to release full year (FY19) results on 21 June 2019.

Naspers FY19 results: what do we expect?

In terms of the upcoming results, the group has given the following guidance as what we can expect for the fourth quarter (Q4):

• Headline earnings per share (EPS) to increase by between 118% and 121%
• EPS are expected to contract by between 39% and 40%
• Core headline EPS are expected to increase by between 31% and 33%

The headline EPS figure shows the group’s share of fair-value gains in its Tencent investment and its realised profits and loss through investments.

The EPS figure reflects gains in the disposal of the group’s interest in Indian ecommerce business, Flipkart, as well as the gain recorded on the distribution of the Multichoice Group to shareholders. The decline in earnings is mainly due to the $9.1 billion realised from a sale of a 2% interest in Tencent recorded in the comparative financial period (FY18), a non-recurring item in the upcoming results.

The core-headline EPS figure shows the performance of the group, adjusted for the non-operational items.

How to trade the Naspers results

Broker ratings

A Thomsons Reuters poll of ten analysts maintain a long-term average rating of ‘strong buy’ for Naspers (as of 17 June 2019), with six of the analysts recommending a strong buy, four a buy, and none a hold, sell or strong sell on the stock.

Client sentiment

IG clients with open positions on Naspers are overwhelmingly in favour of the share price rising in the near term, with 89% of their trades (as of 12 June 2019) placed as long positions. However, 11% of clients with open position on Naspers expect the share price to fall in the near term.

The Naspers share price remains in a long-term uptrend. After correcting to the 200-day simple moving average (SMA), we have seen the price rebound sharply once again.

Naspers traders respecting the trend would maintain a long bias to trades, with the high at 375,000 the initial upside target. The major low of 305000 coincides with the 200-day SMA. Only if the price was to start trading below this level would we reassess our long bias to trades on Naspers.

Technical traders will however need to be aware of the upcoming corporate activities in Naspers, where the group will be separately listing its global e-commerce businesses, which will disrupt the current technical picture (as of 17 July 2019).

Upcoming Corporate Actions

Naspers plans to separate its global technology and e-commerce investments into the new company (NewCo) on the Euronext Amsterdam next month. Naspers will continue to own at least 73% of NewCo which, in addition to the Amsterdam listing, will have a secondary inward listing in South Africa. Naspers will retain its primary listing on the Johannesburg Stock Exchange (JSE).

The unbundling of the group’s e-commerce business is highlighted by the group as an attempt to unlock value within the business while accessing a larger liquid pool of foreign investment capital.

NewCo is scheduled to be listed on the Euronext Amsterdam and JSE on the 17 July 2019.

Conclusion

Naspers looks set to produce another strong set of FY results on 21 June 2019. Core headline EPS, which are expected to be between 31% and 33% higher, will reflect a strong operational performance from the group.

IG clients with open positions on Naspers reflect a positive short-term retail sentiment for the share, while the ‘strong buy’ average broker rating (Thomsons Reuters) suggests a longer-term positive outlook for the share from an institutional point of view.

From a technical analysis perspective, Naspers remains in a long-term uptrend with 375000 the next upside target should gains continue. Traders might reassess their bullish bias on the share should the 305000 level be breached (with a close below).

Those trading Naspers will also need to be aware of the unbundling of the group’s global e-commerce businesses which will list separately on the Euronext Amsterdam and JSE.