Facebook, Tencent and why Naspers’ Koos Bekker doesn’t need a salary

I was recently asked why it was that emerging markets media giant Naspers has had such a run, why the stock price was up so much. I thought for a while and then applied myself and came up with a couple of suggestions.

A Facebook re-rating over the last eight trading sessions must have a lot to do with it. Plus LinkedIn. The “quality” internet assets have been rerated.

Then there’s the fact that Chinese internet giant Tencent, in which Naspers has a large stake, is up a whopping 33.3%. Over the last month alone its stock has risen 20.23% in Hong Kong.

On a simple NAV basis that rise has added R51.15-billion to Naspers’ value (570bn HKD @ 308.4 on the 25th of June to 685.98bn HKD @ 370.8 on the 5 August = 115.4 bn HKD difference X 1.2697 (exchange rate) = 146.57bn ZAR * 34.9% stake = R51.15-billion)

Pretty easy to understand, methinks!

25 June, Naspers = R688, 5 August = R815. Shares in issue = 415-million shares. R127 X 415-million = R52.7 billion.

Sounds about right!

The market I guess was working properly there. And Facebook, if you had not noticed has been through its listing price of last May. In early September the stock traded as low as US$17.55. There must be a load of people out there who are looking at the price at US$39.19 and asking themselves, why oh why did I sell that one? Because at the time there were anxieties over whether the company could monetise mobile. And yes, by the time the company reports its next quarter you might see advertising through its mobile channels at nearly half of all revenues. The company trades on a forward multiple of 80. That is crazy. But that shrinks quickly over the coming years as the business starts to be more and more profitable.

But back to the other issue at heart here too, the remuneration of Koos Bekker in Naspers stock. I was asked about that too, and equally I am going to share my answer with you:

In the company’s annual report it says:

“The chief executive, Mr J P Bekker, does not earn any remuneration from the group. In particular no salary, bonus, car scheme, medical or pension contributions of any nature are payable. No other remuneration is paid to the executive directors. Remuneration is earned for services rendered in connection with the carrying on of the affairs of the business in the company. Interests in group share-based incentive schemes are set out below.”

Also, it makes it clear:

“Mr J P Bekker has an indirect 25% interest in Wheatfields 221 Proprietary Limited, which controls 168 605 Naspers Beleggings (RF) Beperk ordinary shares, 16 860 500 Keeromstraat 30 Beleggings (RF) Beperk ordinary shares and 133 350 Naspers A shares.”

But the person asking was most likely referring to the shares payment arrangement, the 3.9-million shares that are to be paid in the years three, four and five of his current contract:

He agreed, the board agreed and shareholders no doubt ratified the payments in shares. When the share price was much lower, that stake was worth a whole lot less.

Total shares in issue are around 415.8-million shares, he is effectively a four percent shareholder. It’s good to have the chief’s own holdings aligned with yours, it is not altogether his fault that the stock price has gone bananas and through the roof. That is no doubt why he structured the deal that way.

I’m not sure what to think further, but shareholders should glad that he has his interests aligned with theirs. Shareholders must remember that in large part it was and is his visionary thinking that made them a fortune, so far of course.

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This article by Sasha Naryshkyine is adapted from the Vestact newsletter and republished with permission.

Image: World Economic Forum (via Flickr).