Souq, Dubizzle & Naspers
"In July 2013 the group acquired an additional interest of 28,6% in Dubizzle, an online classifieds platform centred on Dubai. The group’s total interest in Dubizzle increased to 53,6% and the group now accounts for Dubizzle as a subsidiary. The fair value of the total purchase consideration was R939m, consisting of R477m in cash for the additional interest and R462m being the acquisition date fair value of the existing interest held in Dubizzle”
At today’s values (1 ZAR to 0.093 USD) , that values Dubizzle at a total of ZAR 1.752 billion, which is the equivalent of USD 162 million.
More interestingly given our context:
"In June 2013 the group acquired an additional 6,1% interest in Souq Group Limited, an online retailer, marketplace and payment platform business, with operations in the UAE, Saudi Arabia, Egypt and Kuwait, for R296m in cash. During March 2014 the group acquired a further interest of 11,8% in Souq Group Limited for R911m in cash. The group now has a 47,6% interest in Souq Group Limited”
As of the last round of funding, Naspers is valuing Souq and its subsidiaries at ZAR 7.720 billion, which equates to USD 717 million at today’s values.
It’s rumoured that Souq’s revenue line is in the USD 300 million range, which would give it a 2.39x revenue multiple.
Extracting from Naspers’ presentation deck, their total reported e-commerce revenue for e-commerce e-tail (i.e. not classifieds and other forms) was ZAR 10.705 billion (USD 994 million) of which 11% came from Middle East & Africa.
Assuming that Souq is Naspers’ only major investment in the region, and using their method of equity accounting, their share (47.6%) of Souq’s revenue is equivalent to ZAR 1.178 billion (USD 109 million), which would result in total revenues at Souq of USD 229 million.
In terms of Naspers’ recent investment, that equates to a 3.13x revenue multiple, which feels like a fair multiple given the region’s context, but doesn’t even come close to what we typically hear of from Silicon Valley.
I decided to go back and look at Naspers’ previous presentation deck (1HFY14 results from September 2013), to see if I could get a number to compare with.
In June 2013 Naspers invested an amount of ZAR 296 million to acquire an additional stake of 6.1% in Souq, to bring their total interest to 35.8%.
At this point, Naspers valued Souq at ZAR 4.852 billion, the equivalent of USD 450 million at today’s values (note that ZAR depreciated by 14% from March 2013 through to March 2014, creating an additional positive impact for Naspers).
Extracting from the deck, their total reported e-commerce revenue for e-commerce e-tail as of September 2013 was ZAR 6.651 billion (USD 616 million) of which 3% came from Middle East & Africa.
Again, assuming that Souq is Naspers’ only major investment in the region, their share (35.8%) of Souq’s revenue is equivalent to ZAR 199.53 million (USD 18.47 million), which would result in 1H 2014 revenues at Souq of USD 51.52 million.
In terms of Naspers’ June 2013 investment, that equates to a 2.29x revenue multiple, if you extrapolate Souq’s 1H 2014 results in a straight line. Given that it looks like revenue has accelerated considerably from September 2013 through to March 2014, it is likely that the revenue multiple was closer to the recent multiple of 3.13x.
As a final piece of icing, in terms of our wider regional context:
"During May 2014 the group invested a further R543m in cash in Flipkart. The group now has a 17,7% interest in Flipkart on a fully diluted basis"
It looks like the additional 1% acquisition in Flipkart took place at a USD 5 billion valuation.
Lots of food for thought for regional investors trying to figure out whether the e-commerce train is worth jumping on.
Cheap things no good. Good things no cheap.