Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>On Friday 30 October in the morning, <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a><a href="https://www.prosus.com/news/media-release-prosus-to-acquire-us%245-billion-of-na" target="_blank" rel="noopener">announced</a> that it would conduct a US$5bn buyback of Prosus shares and <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> shares (i.e. the subsidiary would buy shares in the parent to avoid passing down income from sub to parent which could be taxed). </p>
<p>There were some pleasant, shareholder-friendly comments. </p>
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<p>In total, Prosus will acquire up to US$5 billion in shares in Naspers and Prosus on the open market, starting after interim earnings are released on 23 November 2020. Purchases will be made on a pro-rata (72.5%/27.5%) basis in line with the economic stakes of both companies in the Prosus/Naspers asset base and Prosus would not vote shares purchased and they would come out of the per-share calculations for EPS and BVPS.</p>
<p>It isn't a lot in the grand scheme of things, but $5bn is $5bn, and the discount is quite wide, so this deserves a look.</p>

On Friday 30 October in the morning, Prosus (PRX NA)announced that it would conduct a US$5bn buyback of Prosus shares and Naspers (NPN SJ) shares (i.e. the subsidiary would buy shares in the parent to avoid passing down income from sub to parent which could be taxed). 
There were some pleasant, shareholder-friendly comments. 



In total, Prosus will acquire up to US$5 billion in shares in Naspers and Prosus on the open market, starting after interim earnings are released on 23 November 2020. Purchases will be made on a pro-rata (72.5%/27.5%) basis in line with the economic stakes of both companies in the Prosus/Naspers asset base and Prosus would not vote shares purchased and they would come out of the per-share calculations for EPS and BVPS.
It isn't a lot in the grand scheme of things, but $5bn is $5bn, and the discount is quite wide, so this deserves a look.

Naspers & Prosus - A $5bn Catalyst Arrives

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

<p>Between early-2018 and late-2019, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> / <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> management took meaningful steps to attempt a narrowing of their discount to listed NAV, the most important of which was announcing the intended spin-off of all Naspers’ ex-South African internet assets into a new entity, Prosus, to be listed on Euronext Amsterdam, with a secondary listing on the JSE, which resulted in a narrowing of the discount from c.35% to c.25%. </p><p>However, in the year since the listing of Prosus, we have seen a “double” discount manifest given Prosus’ c. 27% discount to its listed NAV as well as Naspers’ c. 29% discount to its listed NAV (which entirely comprises its 73% shareholding in Prosus). Intuitively, this seems excessive and, in this insight, I take a closer look at, what I believe to be, the top reasons for this discount, to find catalysts which might unlock value. </p><p>I believe we will continue to see a c.25% holding company discount at Prosus, with another c.20% warranted at Naspers. I cannot, however, identify any catalysts that would cause the “double” discount to widen and have applied these values to my SOTP. I estimate fair value for Prosus at €101/share (31% upside) and Naspers at R4,404/share (47% upside).</p>

Between early-2018 and late-2019, Naspers (NPN SJ) / Prosus (PRX NA) management took meaningful steps to attempt a narrowing of their discount to listed NAV, the most important of which was announcing the intended spin-off of all Naspers’ ex-South African internet assets into a new entity, Prosus, to be listed on Euronext Amsterdam, with a secondary listing on the JSE, which resulted in a narrowing of the discount from c.35% to c.25%. However, in the year since the listing of Prosus, we have seen a “double” discount manifest given Prosus’ c. 27% discount to its listed NAV as well as Naspers’ c. 29% discount to its listed NAV (which entirely comprises its 73% shareholding in Prosus). Intuitively, this seems excessive and, in this insight, I take a closer look at, what I believe to be, the top reasons for this discount, to find catalysts which might unlock value. I believe we will continue to see a c.25% holding company discount at Prosus, with another c.20% warranted at Naspers. I cannot, however, identify any catalysts that would cause the “double” discount to widen and have applied these values to my SOTP. I estimate fair value for Prosus at €101/share (31% upside) and Naspers at R4,404/share (47% upside).

Naspers: “Double” Discount Warranted? The Search for a Catalyst Continues

David Blennerhassett

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<p>On the 27 August, Leyou <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0827/2020082701826.pdf" target="_blank" rel="noopener">announced</a> a Scheme from <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> at $3.3219/share.</p>
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<p>The Offer Price represents a 30.27% premium over the closing price of HK$2.55/share on 19 September 2019, which was the last trading day prior to Leyou's <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0525/2020052501310.pdf" target="_blank" rel="noopener">announcing</a> it was in preliminary discussions with various independent potential investors.</p>
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<p>Irrevocables in favour of the Scheme total 70.02% of shares out - primarily comprising Charles Yuk's stake - and the Scheme is conditional on 75% of shares out voting in favour of the Scheme.  Disinterested Shareholders comprise <em>all </em>shares out. Therefore the blocking stake at the Scheme Meeting is 308.5mn shares or 10% of shares out. No single shareholder has such a blocking stake. The headcount test applies as Leyou is Cayman-incorporated. </p>
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<p>This looks done.</p>
<p>But politics can be a fickle beast. Social media app WeChat was in Trump's crosshairs over what is deemed a possible risk to the national security of the US, concerning personal information making its way to China.  That perceived data risk has now spilled over into gaming platforms operating in the US.</p>
<p>Leyou's shares wobbled a little after gaming companies were asked by Committee on Foreign Investment in the United States (CFIUS) on their security protocols in handling Americans' personal data.</p>
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<p>Shares have now righted themselves - and indeed  - trade closer to terms. </p>
<p>As always, more below the fold.</p>
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On the 27 August, Leyou announced a Scheme from Tencent Holdings (700 HK) at $3.3219/share.


The Offer Price represents a 30.27% premium over the closing price of HK$2.55/share on 19 September 2019, which was the last trading day prior to Leyou's announcing it was in preliminary discussions with various independent potential investors.


Irrevocables in favour of the Scheme total 70.02% of shares out - primarily comprising Charles Yuk's stake - and the Scheme is conditional on 75% of shares out voting in favour of the Scheme.  Disinterested Shareholders comprise all shares out. Therefore the blocking stake at the Scheme Meeting is 308.5mn shares or 10% of shares out. No single shareholder has such a blocking stake. The headcount test applies as Leyou is Cayman-incorporated. 


This looks done.
But politics can be a fickle beast. Social media app WeChat was in Trump's crosshairs over what is deemed a possible risk to the national security of the US, concerning personal information making its way to China.  That perceived data risk has now spilled over into gaming platforms operating in the US.
Leyou's shares wobbled a little after gaming companies were asked by Committee on Foreign Investment in the United States (CFIUS) on their security protocols in handling Americans' personal data.


Shares have now righted themselves - and indeed  - trade closer to terms. 
As always, more below the fold.




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<p>This week in StubWorld ...</p>
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<p><a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>'s discount to NAV has narrowed since its low in late March; yet <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> is around its widest NAV discount subsequent to the Prosus spin-off in September last year.  Naspers' look-thru discount into Tencent is currently 54%, vs. 34% at the time of the spin-off. </p>
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<p>Preceding my comments on Naspers/Prosus/Tencent <em>and </em><a href="https://www.smartkarma.com/entities/hang-lung-group-ltd" target="_blank" data-smartkarma-citation="entities:50:1" rel="noopener">Hang Lung (10 HK)</a> / <a href="https://www.smartkarma.com/entities/hang-lung-properties-ltd" target="_blank" data-smartkarma-citation="entities:49:1" rel="noopener">Hang Lung Properties (101 HK)</a>, are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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<p>As always, more below the fold.</p>
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This week in StubWorld ...

Prosus (PRX NA)'s discount to NAV has narrowed since its low in late March; yet Naspers (NPN SJ) is around its widest NAV discount subsequent to the Prosus spin-off in September last year.  Naspers' look-thru discount into Tencent is currently 54%, vs. 34% at the time of the spin-off. 





Preceding my comments on Naspers/Prosus/Tencent and Hang Lung (10 HK) / Hang Lung Properties (101 HK), are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.





As always, more below the fold.


StubWorld: Naspers Is Cheap To Prosus & Look-Thru

European Event-Driven Analyst

Patryk Basiewicz

PGB Research

<p>The way Prosus let Just Eat go during the bidding war seemed like a strategic retreat. This move led to speculation that Prosus was pulling back so it could make a bolder move for the combined Just Eat Takeaway (JET LN) at a later stage. Fall in the share price of the combined group would have been a good opportunity to acquire JET. The COVID-19 crisis put paid those plans. During the lockdown, British people ate a lot of delivered food. Just Eat business flourished. </p>
<p>Now with a bid on <a href="https://www.smartkarma.com/entities/grubhub-inc" target="_blank" data-smartkarma-citation="entities:5881:1" rel="noopener">Grubhub Inc (GRUB US)</a> on the tape, if Prosus wants JET it has to make its move very soon. Below I analyse the financial ability of Prosus to bid on JET.</p>

The way Prosus let Just Eat go during the bidding war seemed like a strategic retreat. This move led to speculation that Prosus was pulling back so it could make a bolder move for the combined Just Eat Takeaway (JET LN) at a later stage. Fall in the share price of the combined group would have been a good opportunity to acquire JET. The COVID-19 crisis put paid those plans. During the lockdown, British people ate a lot of delivered food. Just Eat business flourished. 
Now with a bid on Grubhub Inc (GRUB US) on the tape, if Prosus wants JET it has to make its move very soon. Below I analyse the financial ability of Prosus to bid on JET.

Just Eat Takeaway / GrubHub (JET LN / GRUB US): Will Prosus (PRX NA) Spoil the Dinner Party?

China

Prosus N.V. provides internet based services. The Company focuses on investments in internet, digital media, e-commerce retailing, and consumer internet companies. Prosus serves customers worldwide.

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Prosus NV (PRX NA)

Naspers & Prosus - A $5bn Catalyst Arrives

Naspers/Prosus finally has a catalyst. It's not a HUGE catalyst but US$5bn is US$5bn. The trick is to think about where this places you at the end...

Travis Lundy

Naspers: “Double” Discount Warranted? The Search for a Catalyst Continues

Since the listing of Prosus, we have seen a “double” discount to listed NAV manifest at Naspers. I take a closer look at the top reasons for this...

Wium Malan, CFA

Tencent/Leyou: China Bytes

After going into a trading halt on the 10 July, Leyou announced Charles Yuk - its largest shareholder - had entered into a privatisation...

David Blennerhassett

StubWorld: Naspers Is Cheap To Prosus & Look-Thru

This week in StubWorld ... Prosus (PRX NA)'s discount to NAV has narrowed since its low in late March; yet Naspers (NPN SJ) is around its widest...

David Blennerhassett

Just Eat Takeaway / GrubHub (JET LN / GRUB US): Will Prosus (PRX NA) Spoil the Dinner Party?

The way Prosus let Just Eat go during the bidding war seemed like a strategic retreat. This move led to speculation that Prosus was pulling back so...

Patryk Basiewicz

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