“The affirmation reflects our view that the liquidity offered by the sizable listed equity holdings in Tencent Holdings Limited (A3 stable) and Mail.ru Group (not rated) of over 577 billion rand and available cash balances of 13.7 billion rand provides tolerance for the credit metrics to temporarily exceed our current downward rating guidance,” said Dion Bate, a Moody’s vice president and local market analyst for Naspers.
(READ MORE: Fitch downgrades Naspers to BB+ due to profit loss)
[DATA NPN:Naspers Limited] is a multinational group specialising in e-commerce and media platforms with large stakes in Chinese investment firm, Tencent, and Russian internet company, Mail.ru.
Bates added that Nasper’s increased investment spend in its e-commerce businesses has resulted in lower than expected EBITDA and weaker credit metrics beyond Moody’s current downward rating guidance.
Moody’s expects that Naspers’ credit metrics will remain weak for the next 18 to 24 months as the company continues to pursue its high development spend e-commerce growth strategy.
Naspers’s adjusted debt/EBITDA may be stuck between 5.0x and 5.5x for the next two years before its ecommerce businesses are monetised and able to contribute positively to cash flows and capex reduction.
(READ MORE: Naspers focuses on fuelling organic growth)
However, Moody’s believes that Naspers’ stable outlook reflects its leading market position across the media industry and takes into account the company’s strong operating performance, sustainable cash flow generation profile and good growth prospects.
(READ MORE: Naspers to reinvent itself as mobile powerhouse )
The agency also took into account Naspers’ solid performance in the pay-TV business, with subscriber revenue soaring particularly in the low income segment, which is set for further growth due to low market penetration in sub-Saharan Africa and the improved affordability of entertainment packages.
On the other hand, Moody’s also noted Naspers’ position as an emerging market operator susceptible to political and economic instability as well as to regulatory and currency fluctuation risks.
Also, the company is constrained by its complex organisational structure and debt services which are reliant on cash flows generated by entities that have minority shareholders.
Negative pressures on Naspers’ rating could occur if the company’s business profile deteriorates, operational underperformance or if its stake in Tencent or Mail.ru is weakened.
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