A Cheap Way to Invest in Chinese Web Giant TenCent: Buy Naspers

Over at TechCrunch, roving editor Sarah Lacy blogs about TenCent, the Chinese Internet giant that grew huge by selling virtual bling for avatars on its ubiquitous QQ instant-messaging network and has since moved into online games and numerous other revenue streams. As Lacy points out, TenCent (TCEHY) is one of the three largest pure-play Internet companies by market capitalization, joining the likes of Google (GOOG) and Amazon (AMZN).

TenCent also holds 10% of Digital Sky Technologies, the Russian venture capital and private-equity fund that has snapped up huge stakes in some of the most promising online companies including social network Facebook, social commerce startup Groupon and social game giant Zynga.

Naturally, shares of TenCent have been a hot ticket among investors. But few realize that there's a stealthy and cheap way to buy into TenCent at a major discount -- a way to gain probably all the potential upside of the company without paying the full freight. That would be to buy shares of Naspers (NPSNY), the South African cable provider and media giant. In 2001, when TenCent was still a young company, Naspers took a 45% stake in it. Shares of TenCent have soared by 3,100% since then, despite a recent downturn.

Good Prospects for Growth in South Africa

Along the way, Naspers did unload 10% of its stake, but it has used that gain to snap up loads of promising Internet real estate in fast-growing countries over the past five years. Those buys include Mail.ru, a 100% stake in leading Polish instant messaging service Gadu-Gadu and a 91% stake in BuscaPe, a supplier of online comparison-shopping technology to more than 100 portals and large websites in Latin America.

Naspers' largest acquisition to date was the 2008 acquisition of Tradus for over $1 billion. Tradus is a leading provider of online auction and trading platforms in Eastern Europe.

Although it has built an impressive stable of stakes spanning the world of emerging markets, Naspers' prospects in its home market of South Africa are quite promising. The fast-growing nation accounts for roughly 73% of Naspers' revenues. Like the rest of the developing world, South Africa has largely sidestepped the painful global recession, despite racking up impressive economic growth rates of around 5% per year during most of the 2000s. The country's rich commodity sector, including precious metals and minerals, has shielded South Africa's economy and, by extension, Naspers. That shield is likely to prove increasingly effective as the world economy recovers and demand for commodities increases.

That means Naspers' revenues from pay TV and print media (which is still growing nicely in the developing world) will probably remain healthy. Add that to Naspers' disparate emerging-market investments and the potential sale of its TenCent stake -- or the continued growth in profits it would accrue by keeping it -- and Naspers looks like a wonderful way to invest in the growth of the Web on a global scale. And you can do so while still playing it safe with a powerful incumbent cable operator in a fast-growing African market.