Expansion weighs on S.Africa's Naspers earnings, shares fall


* Core earnings down 2 pct

* Spends $719 mln on development

* Shares fall nearly 4 pct Monday, up 11 pct this year

(Adds details, CEO & analysts' comments)

By Helen Nyambura-Mwaura

JOHANNESBURG, June 23 (Reuters) - South African e-commerce

and media firm Naspers, the continent's biggest

company by market value, posted a surprise 2 percent drop in

full-year earnings on Monday after ratcheting up expansion

spending, sending its shares lower.

Naspers used 7.7 billion rand ($719 million) on development

spend, a 79 percent jump from a year ago. It also holds $1.6

billion offshore that can be used partially for acquisitions and

further expansion, its chief executive said.

Analysts polled by Reuters had forecast core headline

earnings, which exclude some one-off items and considered the

main measure of profit, would rise by as much as 15 percent.

They instead shrunk 2 percent to 2,181 cents per share.

"I am a little disappointed with the results," said Reuben

Beelders, portfolio manager at Gryphon Asset Management.

Naspers share price was down nearly 4 percent by 1307 GMT at

1,220 rand, but were up 11 percent so far this year.

The Internet segment, which includes websites like FlipKart,

Souq.com and OLX, was the biggest profit churner, riding on

Naspers' shareholding in China's Tencent's and on

Mail.ru in Russia.

Naspers' stake in Tencent, China's largest listed tech firm

with a market value of nearly $140 billion, is worth nearly as

much as Naspers' entire market value.

Naspers has been strengthening its e-commerce muscle and in

February plucked the head of its eastern European on-line

marketplace, Bob van Dijk, as its new CEO.

"We are a strong believer in the potential of the Chinese

internet market. It is already is the largest in the world and

has grown quite strong, but that market still has a lot of

runway," van Dijk told Reuters.

Despite posting a 64 percent jump in e-commerce revenue,

Naspers still booked some 5.3 billion rand in trading losses for

the segment, chiefly because of expansion expenditure.

"My biggest problem with this company is they are operating

in a very aggressive space ... there is always going to be a

component of their revenue that they have to spend as capex just

to maintain their business," Beelders said.

Naspers' Multichoice business - which holds a set of

lucrative television sports rights - added 1.3 million new

households in the year, helping boost revenue by 20 percent.

The company's price earnings ratio is 99 times, making it

one of the most expensive stocks on the Johannesburg bourse by

that measure. Tencent is trading close to 50 times earnings.

"This is certainly an exciting business, but we think there

is significant downside risk in the share price if the future

performance of Tencent doesn't turn out as the market expects,"

said Nic Norman-Smith, a portfolio manager at Lentus Asset


(Editing by Joe Brock)