Monday, January 24

Naspers and Prosus keep going

Naspers and Prosus announced strong growth in the six months to the end of September 2021, with revenue increasing by 29% and business profit by 8%.

This growth was primarily driven by continued expansion and consumer acceptance of food delivery, whose revenue increased 86% to $ 1.3 billion (around R20.6 billion) in the six months under review.

Unfortunately, it’s taking longer than some investors expected to translate the “next big trend” investment into profits. The food delivery business reported business losses increased 55% to $ 312 million compared to the same six months in 2020, according to figures presented by both. Naspers and Prosus.

However, management remains optimistic, saying that the increase in business losses simply reflects increased investment in food delivery ancillary services and customer acquisition costs, and increased interest in Delivery Hero.

Food delivery

“Operating margins in the food delivery segment improved significantly, by 6 percentage points, as the business benefited from greater scale,” according to management’s comment on the results.

He continues to discuss the different businesses within the food delivery segment, such as Swiggy, which reported a strong recovery during the first half of the financial year.

“The team generated 56% growth in food delivery revenue, 91% more compared to pre-Covid-19 levels. Grocery revenue grew 75% compared to March 2021, ”he says.

The figures are staggering. The number of orders grew by 83% to 1,400 million and the gross value of these orders by 86% to 16,200 million euros during the last six months.

That equates to more than R287 billion worth of pizza, hamburgers, and fried chicken to eat at home.


Meanwhile, online classifieds businesses reported increasing profitability. Revenue doubled to $ 1.3 billion and business profit increased 133% to $ 108 million, according to Naspers results.

“OLX Group had a solid performance compared to the same period last year. In well-developed markets, such as Russia, Poland and Brazil, the group accelerated the development of new consumer proposals, such as payment and shipping services, increasing trust and security in its platforms and expanding its auto transaction business ” the CEO noted. Bob van Dijk in his comment on the results.

OLX’s vehicle sales portion – OLX Autos – reported record volumes with 69,000 auto transactions on its platform during the period.

A quick calculation shows that this equates to selling (and people buying) 377 vehicles every day, seven days a week.

The bottom line of improved returns on classifieds interest and Tencent’s continued good performance, offset by investment in new business, was that earnings per share for major stocks declined marginally in both Naspers and Prosus.

Market reaction

The market reaction to the results can best be described as moderate. Investors obviously appreciate the long-term opportunities, but they don’t seem sure what to make of this set of results.

The top two stocks on the JSE indices fell sharply after announcing their results on a day when the rest of the JSE stocks posted gains overall.

Naspers was down 2.3% to close at R1 653 and Prosus fell 1.5% to close at R1 352.

It is of interest that almost R1.2 billion worth of Naspers shares were traded on Monday, not that the volume was exceptionally high. Almost R1.4 billion in Prosus shares traded on the JSE.

But everything is relative for one of the largest Internet companies in the world.

“Alibaba took a hit today and Hong Kong is flat. Tencent is just keeping its recent gains, ”a Prescient Securities trader told Moneyweb.

“It is worrying that the discount on both Naspers and Prosus has deepened lately. In all, there are indications that the market was not surprised by the results, ”he says.

In general, investors seem willing to stick with Naspers and Prosus, expecting the success of the startups in a few years.

However, they price risks at a high price, as both Prosus and Naspers trade closer to their lows of the past 12 months than their recent highs.

For a pdf version of the above, click here.

For a pdf version of the above, click here.

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