November 30, 2018 / 2:19 PM / 8 months ago

Losses at Naspers' e-commerce unit narrow but Tencent still dominates

JOHANNESBURG (Reuters) - South African internet giant Naspers (NPNJn.J) reported a sharp narrowing of losses at its e-commerce unit on Friday, boosting chief executive Bob van Dijk’s efforts to cut the company’s dependence on its Chinese money spinner Tencent (0700.HK).

FILE PHOTO: A satellite dish connecting residents to South Africa's DSTV television network, owned by telecommunications giant Naspers, adorns a shack in Khayelitsha township, Cape Town, May 25, 2017. REUTERS/Mike Hutchings/File Photo

Founded more than 100 years ago in Stellenbosch, South Africa, Naspers has transformed itself from a newspaper publisher into a $87 billion empire, thanks to its one-third stake in tech giant Tencent.

But the stake is also a headache as it dwarfs Naspers’ own market capitalization by 40 percent, mirroring a dilemma faced by Yahoo a few years ago where its core business ended up being worth 10 times less than its stake in Alibaba (BABA.N) and Yahoo Japan (4689.T).

Yahoo fixed that by selling its core operating business to Verizon (VZ.N) in 2016 and re-branding what was left as Altaba (AABA.O), a conflation of ‘alternative’ and ‘Alibaba’.

Van Dijk, who took the helm at Naspers in 2015, said turning the company’s e-commerce ventures around to make a profit was vital to closing the valuation gap of around $35 billion.

The division’s losses narrowed 34 percent to $209 million in its first half ended September, compared with the same period last year. That was largely due to a first-time profit contribution from classifieds platforms that include Letgo, a mobile app that competes with Craigslist in the United States.

Overall, Naspers reported a 39 percent jump in half-year core headline earnings to $1.7 billion, or 385 cents per share, driven by a strong contribution from Tencent, a results filing showed.

Core headline EPS is Naspers’ main profit measure that strips out non-operational and one-off items.

Tencent’s $1.8 billion contribution to the measure helped offset weakness at the company’s other businesses that include e-commerce platforms MakeMyTrip and Delivery Hero.

Naspers also unveiled plans in October to hive off and separately list its pan-African pay-TV group Multichoice, months after selling around 2 percent of Tencent and all of Indian e-commerce firm Flipkart - raising around $9.4 billion.

The money is being used to scale up other e-commerce ventures and make new investments in online classifieds, payments and food delivery, with $750 million already spent.

Shares in Naspers closed 2 percent lower at 2,763 rand, in line with the blue-chip Top-40 index .JTOPI.

Reporting by Tiisetso Motsoeneng, editing by Louise Heavens and Kirsten Donovan

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