NASPERS and the Structural Case for Emerging Market Investments

The evolution of NASPERS from a South African publishing house into a global technology and investment powerhouse perfectly illustrates the structural advantages of the BRICS. The firm’s strategic patience and focus on emerging markets is beginning to bear fruit closing the discount rates between the NASPERS, Prosus, and Tencent share prices.

In an era when American firms are under political pressure to reduce foreign exposure to BRICS economies, NASPERS’ contrarian strategy highlights the fundamental shift in where growth and innovation are taking place. Its substantial stake in the Chinese technology sector, operational leadership under a Brazilian CEO, and expanding footprint in India, suggest that growing BRICS economic and political power is translating into financial market returns.

Considering the negative market reaction to the proposed purchase of German value retailer NKD by Mr Price, which saw its stock price decline drastically on the news, it appears SA fund managers are growing sceptical about the long term earnings potential of developed markets, especially in Europe where low growth and political risk undermine earnings potential. 

NASPERS’s European delivery business, Just Eat, has also struggled to reach profitability, with slowing economic growth and higher costs, more regulation, and more competition, resulting in a challenging business environment. In contrast, BRICS economies have offered better returns, with NASPERS’s emerging market investments outperforming. 

This pattern has become more pronounced in a global environment marked by heightened trade tensions and geopolitical conflict. The investment case for Europe more broadly is deteriorating while US efforts to reshore manufacturing and reduce foreign dependencies have contributed to an inward focus that has discouraged sustained engagement with high‑growth foreign markets.

At the same time, emerging economies continue to experience demographic expansion, rising consumer demand, and accelerating digital adoption. For South African companies with the capacity and appetite to look beyond the local market, these structural forces present major opportunities for value creation outside of the financial markets that dominate news cycles.

NASPERS’ investment in Tencent remains the most consequential example of this approach. Acquired in the early 2000s, this stake in Tencent was initially a long‑term option on China’s burgeoning internet economy. However, over time, the value created by this position dwarfed expectations, becoming the foundation of NASPERS’ transformation into a global tech giant.   

Nevertheless, NASPERS continued to trade at a discount to the underlying value of its Tencent holdings for years, reflecting broad-based market scepticism about the capacity of its broader portfolio to generate earnings outside of China. That scepticism has finally begun to dissipate.

Last year, NASPERS’ international consumer internet subsidiary, Prosus, reported positive adjusted earnings and free cash flow from its broader e‑commerce portfolio (while excluding contributions from Tencent) with e‑commerce adjusted EBITDA of approximately $530 million and guidance for 2026 pointing to more than $1.1 billion.

This shift suggests that value creation within NASPERS’ non‑Tencent assets is reaching critical mass, reinforcing the strategic case for continued capital deployment within emerging markets, especially large BRICS economies like India and Brazil which NASPERS has prioritized.  

In Latin America, NASPERS’ investment in iFood offers a compelling example. Purchased when the Brazilian food delivery platform was a nascent start‑up, iFood has since scaled to serve over 100 million customers annually, with gross merchandise value approaching $25 billion.

The platform’s growth has not been limited to meal delivery. It has expanded into payments, loyalty programs, credit services, smart point‑of‑sale systems, and groceries. By building an integrated digital ecosystem, iFood has looked to capitalize on consumer engagement while diversifying its revenue streams.

The interaction between iFood and Despegar, the region’s leading online travel agency, further illustrates the synergies that can emerge when platforms achieve scale in a given market, with referrals from iFood accounting for roughly 5% of Despegar’s net revenue. This underscores how ecosystem strategies in emerging markets accelerate growth and unlock value across sectors.

India represents another frontier in NASPERS’ geographic diversification strategy. Indian food delivery giant, Swiggy, is another major BRICS investment by the company, and a successful IPO in 2024 has further justified this management strategy. Swiggy has achieved significant year-on-year revenue growth thanks to hyper-locality combined with AI optimization.

In addition to Swiggy, Indian social commerce and e‑commerce platform, Meesho, has also received backing from NASPERS, recently completing an initial public offering that valued the company at $8.8 billion. The company’s rapid ascent underscores the structural opportunity presented by India’s large, young, digitally connected population.

Smartphone penetration continues to rise in both urban and rural areas across India, while payments and logistics infrastructure improves rapidly. Analysts believe operational strategies developed for iFood, including loyalty systems, high‑frequency transactions, and cross‑selling mechanisms, could prove equally effective in the Indian context, where an underpenetrated market still offers considerable room for expansion.

For NASPERS, the addition of major Indian investments, combined with its positions in China and Brazil, demonstrate the company’s BRICS focussed diversification strategy. While these markets undoubtably come with their own unique challenges, NASPERS has effectively utilized digital optimisation to gain a competitive advantage in these high-growth economies.

On its own, the management strategy of spinning off Prosus and engaging in share buybacks failed to shore up investor confidence and close the discount rate. Revenue growth in emerging markets outside of China has been the big story, reflecting broader shifts in capital allocation.

While emerging markets are far from monolithic, they share certain investor friendly features. Young, growing populations, rapid digital adoption, and expanding middle classes, represent compelling value-accretive opportunities. These conditions contrast developed economies, where slower demographic growth and entrenched incumbents lead to lower revenue growth.

More recently, political constraints in Western economies, from trade restrictions to regulatory hurdles, combined with heightened geopolitical uncertainty, may further discourage investment at a time when growth opportunities in emerging markets are expanding. For South African firms and investors, this could translate into a more circumspect approach to developed markets.

South African listed companies have squandered billions in developed markets operating under the illusion that these markets were inherently less risky. In contrast, NASPERS recent success suggests structural demand in emerging markets may continue to offer better opportunities. Lower costs, higher growth, and less competition supports revenue growth, with technology and digital commerce expanding rapidly across BRICS economies.

NASPERS’s successful transition from local media to international technology giant is the direct result of these economic shifts in the global economy. The firm’s impressive performance in China, then Brazil, and more recently, India, underscores the value of embracing the growth potential of emerging markets.