Naspers share price jumps after FY23 results release

Naspers FY 2023 Results

Key takeaways:

1. Naspers saw a 7% increase in local currency group revenue, but a negative foreign currency translation of US$2.6bn due to a broad devaluation of emerging-market and European currencies translating to US dollars.

2. Group trading profit declined 31% to US$3.4bn, reflecting Tencent's lower contribution and an increase in the group's share of losses from ecommerce associates.

3. Despite recognizing impairment losses on equity-accounted investments of US$1.7bn, the group maintains confidence in the long-term potential and strategic value-add of its investments.

4. The food delivery industry demonstrated strong growth and profitability, with several companies experiencing impressive increases in Gross Merchandise Value (GMV) and revenue.

5. The edtech industry is experiencing solid growth in majority-owned platforms, but continued investment in technology and international expansion has impacted segment profitability.

6. South African businesses Takealot Group and Media24 reported positive financial results, and Naspers Labs provides digital skills training, job readiness training, and employment opportunities for young South Africans

7. Naspers/ Prosus is simplifying its ownership structure, which will further maximize shareholder value.

The financial overview reveals a 7% increase in group revenue and a decline in group trading profit by 31% to US$3.4bn, reflecting Tencent's lower contribution and an increase in the group's share of losses from ecommerce associates.

However, the group's determination to achieve consolidated ecommerce profitability by the first half of FY25 remains unfazed.

Divisional summary

The OLX Group (Classifieds), operating in the classifieds sector, faced the brunt of the Ukraine conflict but still managed to achieve a 15% increase in consolidated revenue. Excluding Ukraine, the growth rate was even more impressive at 20%. The OLX Group's trading profit margin also showed significant improvement, reaching 19%.

In the food delivery industry, iFood, Delivery Hero, and Swiggy displayed remarkable growth and profitability. iFood's core restaurant businesses saw a 14% increase in Gross Merchandise Value (GMV) and a 24% increase in revenue. Delivery Hero's GMV grew by 18% and Swiggy's by a staggering 58%.

PayU, operating in the payments and fintech sector, experienced a 52% increase in consolidated revenue, with its Indian Payments Service Provider (PSP) business and credit business witnessing significant growth. This highlights the potential of the fintech industry, particularly in emerging markets like India.

Edtech, another promising industry, saw solid growth in majority-owned platforms like Stack Overflow and GoodHabitz, indicating a strong demand for digital learning solutions. Despite investments impacting profitability, the industry holds promise for continued growth and innovation.

South African businesses Takealot Group and Media24 also reported positive financial results, with solid performance across their subsidiaries. Naspers Labs, a program providing digital skills training and employment opportunities for young South Africans, has trained and helped thousands of youths find tech jobs, further cementing the group's commitment to the local community.

Simplifying the Naspers / Prosus Ownership Structure:

In the ever-evolving world of stock trading, the importance of a simplified ownership structure cannot be overstated. Naspers and its subsidiary Prosus are taking a significant step thereto.

The removal of the crossholding between these two giants simplifies the Group, allowing the continuation of the share repurchase programme at the Naspers level. This strategic decision looks to further maximize shareholder value.

The transaction will be executed by both Naspers and Prosus issuing shares to their existing shareholders, with both companies waiving their rights to participate in the respective capitalisation issue of new Prosus or Naspers shares. This arrangement results in:

• Naspers's direct ownership in Prosus aligning to its current economic ownership of 43%

• The remaining 57% ownership of Prosus being held by the Prosus free float, consistent with their current economic ownership of Prosus

• No change in Naspers voting interest in Prosus of 72%

• Prosus remaining a subsidiary of Naspers

This strategic move ensures that Naspers will remain JSE listed and a South African domiciled and tax resident company. Prosus, on the other hand, will continue to be a controlled foreign company of Naspers for South African tax purposes and retain its listing in the Netherlands.

Naspers – technical view

The share price of Naspers has been trading in a broad range between levels 291800 (support) and 358000 (resistance).

In the near term the price has gapped higher following the results release, off range support and from oversold territory. 346650 provides the next upside resistance target from the move.

Traders who are long might consider using a discretionary stop on a move into the midpoint of the gap range (303500 to 319000) to allow a favourable risk relative to reward assumption.