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    Innovation Village | Technology, Product Reviews, Business
    You are at:Home»Africa»Naspers Finally Lists MultiChoice (MCG) on The JSE

    Naspers Finally Lists MultiChoice (MCG) on The JSE

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    By Tapiwa Matthew Mutisi on March 2, 2019 Africa, Brands, Business, Entertainment, Investments, News, Stock Market, Streaming

    So the big day for MultiChoice Group (sharecode MCG) arrived as the owner of M-net, SuperSport and showmax has finally been unbundled from Naspers. So all the speculation about where the share price will trade at can finally come to an end.

    Background on Naspers and MultiChoice

    Below a bit of background on Naspers as well as MultiChoice group and our prediction of where the share price will trade at (as per our article we published on 21 January 2019 regarding the MultiChoice unblundling)

    Naspers

    Founded in 1915, Naspers is a global internet and entertainment group and one of the largest technology investors in the world, operating some of the world’s leading platforms in internet, video entertainment and media. Today, Naspers invests and operates in more than 120 countries and markets that the group believes have long- term growth potential, including China, Central and Eastern Europe, Russia, Africa, North America, Latin America, India, Southeast Asia and the Middle East. Naspers seeks to address big societal needs through technology by identifying changes in consumer behaviour early and building businesses that have scale, are profitable and generate healthy cash flows.

    MultiChoice

    MultiChoice, its subsidiaries, affiliates and associates (“MultiChoice Group”) is one of the leading video entertainment operators on the African continent, and one of the fastest growing pay-TV broadcast providers globally, entertaining 13.9 million households (as at 30 September 2018) across 50 countries. Its carefully curated local and international content is distributed across multiple platforms, including digital satellite and terrestrial television, as well as through OTT solutions. The MultiChoice Group is structured around the following three business segments: – South Africa, the MultiChoice Group’s division that offers digital satellite television and subscription video-on-demand services to 7.2 million subscribers in South Africa (as at 30 September 2018). Connected Video, which forms part of the South Africa segment from a financial reporting standpoint, delivers online video entertainment services to subscribers; – Rest of Africa, the MultiChoice Group’s division which offers digital satellite, online services and digital terrestrial television services to 6.7 million subscribers across Africa (as at 30 September 2018); and – Technology, which includes the MultiChoice Group’s leading digital platform and application security division, Irdeto.

    Effects of the unbundling on Naspers

    So what is  MultiChoice’s earnings like? In the past it has been very hard to gauge the potential and value of MultiChoice due  to it forming part of Naspers’ earnings. But in their pre listing statement pro forma financial results have been published. We take a look at their pro forma financials below.
    So while MultiChoice has seen strong subscriber numbers growth  over the last three years, infact 29.4%, while revenue over the same period only grew by 1.4%. Their trading profit margins are in decline too. But looking at the number of shares MultiChoice plans on issuing, their trading profits and placing a PE ratio of 15 on MultiChoice shares, it will give the company a valuation of R94.8 billion (which will make MultiChoice the 21st largest firm listed on the JSE) or around R211 a share

    Note we do not think that MultiChoice will trade at a PE of 15. We merely used it as a benchmark PE ratio as it is close to the overall market average. We believe in the long run MultiChoice group will trade at a PE of  around 8, due to the struggling segment they are operating in. Competition from online pay per view companies such as Netflix eating into their subscriber base. At a PE of 8 we see them trading at around R112 a share.

    But don’t be surprised if on listing the price surges as large funds tracking the Top 40 (and don’t have a lot of exposure in NPN) needs to buy the share to have it in their funds. A gradual decline after the feeding frenzy mayhem of listing will then probably set in and MCG we predict will be trading at a PE of around 7/8 a few months after listing.

    So where are MCG shares trading at? The screenshot taken from Sharenet earlier shows the price action of MulitChoice Group in the first hour of trading in the JSE today.

    So based on the current trading price of MCG shares it is very close to our estimated value of R112 a share (which should see it trade at a PE ratio of around 8 times.
    So by 13:00 on MultiChoice group’s first trading day, the share has traded 20.48 million shares, and total value of trade on MCG’s trades on its first trading day amounted to R2.16 billon according to data from Sharenet. While Naspers over the course of the day has only traded R1.2 billion worth of shares. Clearly showing that MCG is the most actively traded stock for the day.

    Related

    Africa Entertainment JSE M-Net MCG Multichoice MultiChoice Group Naspers Showmax Supersport unbundling video-on-demand services
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    Tapiwa Matthew Mutisi
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    Tapiwa Matthew Mutisi has been covering blockchain technology, intelligent technologies, cryptocurrency, cybersecurity, telecommunications technology, sustainability, autonomous vehicles, and other topics for Innovation Village since 2017. In the years since, he has published over 4,000 articles — a mix of breaking news, reviews, helpful how-tos, industry analysis, and more. | Open DM on Twitter @TapiwaMutisi

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    2 Comments

    1. Pingback: MultiChoice Group Ordered to Pay $4.38B Tax Backlog | Innovation Village | Technology, Product Reviews, Business

    2. Pingback: Nolo Letele steps down from MultiChoice Board - Innovation Village | Technology, Product Reviews, Business

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