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A-rated manager: why I’m backing Netflix’s main EM rival

A-rated manager: why I’m backing Netflix’s main EM rival

AllianceBernstein’s Laurent Saltiel is backing South African telecoms giant Naspers to make a major splash with its Netflix-like rival Showmax.

Saltiel, who runs several funds at the US investment firm including the $562.4 million AB Emerging Markets Growth Portfolio, said streaming service Showmax is the new kid on the block when it comes to streaming and could tap a growing emerging market audience.

The service, which was launched in August 2015, offers users options to stream or download a variety of series, movies and documentaries. The platform is available on the web, smartphones, tablets and smart TV’s.

‘Netflix is still very small in South Africa, but what Naspers is trying to do, is have a viable alternative to make sure that Netflix doesn’t gain too much of a market share,’ said the Citywire A-rated manager.

'The advantage in South Africa is that Naspers have a much broader choice in terms of movies and TV shows that they’ve already licensed and that they can offer to Showmax.’

US-based Netflix needs to contact TV shows or movies for every single country or specific region it is operating in, while it cannot use a US-content library to market it in South Africa, Saltiel added.

For a subscription to Showmax, users would pay an equivalent of $6.36 (R99) for a monthly subscription, while its main competitor Netflix charges $9.99 per month.

Saltiel said Naspers is entering the market with a big advantage because it is a global player that has started with a huge library of content. Naspers has been one of the best performers for his EM fund over the past three years and makes up 4.85% of the fund.

Market growth

Elsewhere, Saltiel has 20.17% of the fund allocated to India and said the country has gone through positive change, which has given it a very solid growth rate.

‘In our mind, in terms of development India is where China was 10-15 years ago, you still need a lot of very basic goods and services that you already have in China so it opens a lot of opportunities for the economy.’

One of the sectors Saltiel is focused on is the housing market. Housing Development Finance (HDFC) has a 2.97% allocation in the fund and features in its top ten holdings. The company is the largest mortgage provider in India.

‘This is a market that is going to grow 15-20% a year. Mortgages have very low penetration in India, a mortgage to GDP is about 7% in India, 20% in China and 75% in the US. The market in India is young and a very attractive long term opportunity.’

These comments on the Indian banking sector follow Fidelity's Teera Chanpongsang, who earlier this month said he was snubbing India's state banks over fears about the growth potential for the sector.

The AB Emerging Markets Growth Portfolio lost 7% over the three years to the end of April 2016. This compares to a fall of 12.1% by its Citywire-assigned benchmark, the MSCI EM (Emerging Markets) TR USD, over the same timeframe.

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