Naspers Nibbles Again

South African media conglomerate Naspers (Nasdaq: NPSN) recently announced a 30% minority investment in MXit, a small instant messaging platform in South Africa, for an undisclosed amount. MXit's system lets users chat on a GPRS system at a fraction of the cost of regular SMS. While MXit is profitable, it will hardly show up on the Naspers income statement, where revenue was expected to exceed R17 billion (US $2.2 billion) in 2006, with more than R2 billion in profits.

What's the big deal? The last time Naspers invested in a messaging outfit, it was a Chinese start-up called Tencent. That $34 million stake is worth more than $2 billion today, thanks to Tencent's soaring shares on the Hong Kong stock exchange. Tencent went public in 2004, with Naspers retaining a 36% stake.

Investing wisely
According to Naspers: "Tencent is the leading real-time communications platform and online community in China, with some 13 million peak simultaneous instant-messaging users and 149 million active user accounts. During the year, a wide range of new value-added services was launched, including music-streaming services, enhanced avatar-related services and online data storage services for consumers. Tencent has expanded its online games offering and has become the leading casual games operator in China."

A few days before the MXit announcement, Naspers announced another 30% investment, a $165 million investment in Mail.ru, the top email service for Russian-speaking Web users worldwide.

A work in progress
Naspers itself was originally an old-line South African newspaper company, with some stodgy Afrikaans titles and a Sunday paper aimed at black readers. Then they bought MIH Limited (MIHL), the owner and founder of M-Net, South Africa's first independent pay TV service. The tired old newspaper outfit suddenly became a dynamic media conglomerate. MIHL CEO Ton Vosloo became chairman of the combined entity, a sign that the company still intends to keep growing, rather than rest on its laurels.

The largest division, pay TV, is very profitable; operating margins have ranged from 25% to 31% over the years. M-Net became DSTV, spreading all over southern Africa and the Indian Ocean via satellite after the fall of apartheid in 1994. Now NPSN can add new subscribers at a very low cost (they typically have no competition in their markets) and put most of that new revenue on the bottom line.

NPSN also has pay TV operations in Greece and a listed Thailand joint venture called UBC.

Naspers is one of the only stocks I ever bought cheap, held for a double, sold, and then bought back after it doubled again, because it was still cheap even then. The company's consistent 20% growth has made it a stellar investment since 2003, when the shares traded around $3 (they now go for $24). My second investment is already up 50%.

With 2007 revenues slated to increase 15%, and expected profit growth of as much as 40%, Naspers is still a good buy at today's prices, and an excellent long-term investment if you want to back smart managers who know what to buy in a changing tech world. At 17, the forward P/E is cheaper than Time Warner (NYSE: TWX) or Comcast (Nasdaq: CMCSA).

I expect these shares to appreciate in value from here, as long as management continues to execute. They haven't disappointed me yet.

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Fool contributor Dale Baker, a private client portfolio manager and former US diplomat, worked and lived in southern Africa for many years. He owns shares of Naspers for himself and his clients, and welcomes your questions or comments. Time Warner is a Stock Advisor pick. The Fool has a disclosure policy.