Weekly Stocktake

Naspers, South Africa’s largest company by market capitalisation, began its journey in the print media industry. It later expanded into pay-TV, launching M-Net, which became a household name across the continent. However, the company’s most transformative move came in 2001, when it acquired a 46.5% stake in Tencent, the Chinese social media and gaming giant. 

Tencent operates two of China’s most popular social platforms: Weixin and WeChat. These multifunctional apps allow users to chat, shop online, and make payments—all within a single ecosystem. As of its latest results, Tencent reported 1.4 billion users across these platforms, with the vast majority based in China. 

Over the years, Naspers has gradually reduced its stake in Tencent. In June 2022, it held 28.5%, and as of its most recent financial report, that figure now stands at 23.5%. The rationale behind this sell-down is to narrow the gap between Naspers’ market valuation and the net asset value (NAV) of its holdings. Holding companies often trade at a discount to NAV, and Naspers is no exception. According to the company, its NAV per share is R8,473.50, while its share price on 20 June 2025 was R5,235.40—reflecting a 38% discount. 

Proceeds from the Tencent stake reduction have been used to expand Naspers’ e-commerce footprint. The company is focusing on lifestyle e-commerce businesses across Latin America, India, Europe, and South Africa. In the past 12 months, Naspers invested $7.8 billion in mergers and acquisitions, while divesting $2.6 billion from underperforming assets, including its stake in Superbalist. New management seem to be making good progress on its e-commerce businesses, the latest results show most of these businesses being cash flow and earnings positive.  

However, this strategy is not without risk. Selling down a high-performing asset like Tencent to fund new ventures presents a significant challenge: replicating such outsized returns is notoriously difficult. Tencent has been a once-in-a-generation success for Naspers, and finding the next equivalent may prove elusive. 

Last week, Inditex—the parent company of Zara—released its Q1 2025 results. Net sales for the quarter reached €8.2 billion, marking a modest 1.5% year-over-year increase. Net income rose to €1.3 billion, up 0.8% from the same period last year. While growth has slowed, largely due to market uncertainty surrounding tariffs, recessionary fears, and a strong euro. The company noted that in constant currency terms, sales would have increased by 4.2%.

Inditex’s hallmark is its highly flexible supply chain, which allows the company to adjust production in real time based on demand signals from both its online and physical stores.

This agility is particularly valuable during periods of economic uncertainty. With demand softening, Inditex is well-positioned to avoid excess inventory, reducing the risk of markdowns and impairments on its financial statements.

Since the COVID-19 pandemic, Inditex has been actively optimizing its store portfolio. The company has closed smaller, less productive stores while expanding larger ones and opening flagship locations in prime retail areas. This strategy has led to an increase in net sales per square metre, as customers tend to spend more when they can physically browse a broader selection of products.

Despite its focus on physical retail, Inditex continues to invest heavily in its e-commerce and logistics infrastructure. For FY24 and FY25, the company plans to allocate an additional €900 million annually in capital expenditure to enhance its logistics capabilities, supporting both online and offline growth.

Inditex maintains a strong financial position, with a net cash balance of €10.8 billion—down slightly from €11.6 billion in Q1 2024. This robust liquidity provides the company with significant strategic flexibility, enabling it to invest, expand, and navigate a market slowdown.