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Sep 10 2008

Naspers, MTN among world’s top value-creators

Published by at 11:49 am under Companies

South African media group Naspers and telecommunication company MTN Group are among the best in the world, when it comes to creating value for shareholders. At least, that was the case in the five years from 2003 to December 2007.

According to research of the Boston Consulting Group (it studied 5,000 companies around the globe with a market capitalisation of more than €1 billion) no media/publishing company in the world created more value for its shareholders in the 5-year period to 31 December 2007 than Naspers.

The research was conducted for the German financial weekly magazine WirtschaftsWoche and published in a cover story in the latest issue of the magazine. You’ll find the complete Boston Consulting report (in English) here

This might sound like good news, but it isn’t: Boston Consulting also warns that Naspers is “overpriced” and highely unlikely to continue on the value-creating path of the past five years.

This is how WirtschaftsWoche formulated it: “Which shares will take investors best through the tough times ahead? Most likely NOT those which had performed best in the past five years, that is, the shares at the top of the different sector lists. Because, Boston Consulting historical data show no company in the world has been able to beat the rest (stay at the top) for ten years in a row.”    

Based on this argument, the MTN Group came out of the research smelling better (it was “only” the fourth best value-creator for shareholders in the sector technology/telecommunication and its share price was less “overvalued” on 31 December 2007). 

Now, the context. Factor in the history of Naspers in the five years before 2003 (when a few fundamental judgment errors on the part of the Naspers senior management lead to a huge over-investment in the internet, which pushed the share price down from around R100 to about R25, before a decision taken in mid-2001 to cut some losses put the share on the road to recovery) and the Boston view becomes more compelling.

The questions are: Is all of this still relevant after the most recent happenings on the JSE? Is there any value in the Boston research without the context of the “overdone internet adventure” which meant the share started from an “artificially low base” in 2003?

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