Tencent and Naspers Ltd – A Giant Venture Capital Payoff

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Tencent Holdings Ltd Building interior

Naspers Ltd, the Cape Town-based company, is selling $10.6 billion of shares in Tencent Holdings Ltd., equal to 2 percent of the stock in the Chinese operator of the WeChat messaging service, in one of the greatest venture-capital investments ever. The stake Naspers bought for just $32 million in 2001, when Tencent was an obscure website in a nation where few people used the internet, is now worth $175 billion.

Asia’s most valuable company warned it would sacrifice short-term margins, spending on content and technology in pursuit of growth.

We continue to believe that Tencent is positioned to be one of the very best growth enterprises in any industry in the world. This firm saw EPS growth of 30.9 percent last year, with the current growth estimate for this year calls for earnings-per-share growth of 39.6 percent. Furthermore, the long-term growth rate is currently an impressive 27.2 percent, suggesting pretty good prospects for the long haul.

And if this wasn’t enough, the stock has seen estimates rise over the past month for the current fiscal year by about 1.9 percent. Thanks to this rise in earnings estimates, Tencent remains a strong buy which further underscores the potential for out-performance in this company.

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