Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Equity Analyst with 15+ years of experience as a Buy Side analyst covering companies in the Emerging and Developed markets.
Fundamental and Quantitative analysis on companies in the Internet, Telecommunication, Media, Technology, IT Services, Healthcare, Pharmaceutical and other Industrial sectors.
Idea generation focussed on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Global Emerging Market Equities

Prosus/Naspers: Fundamental Drivers of the Discount Revisited Post the Exchange Offer

Naspers Drives South Africa Positioning to All-Time Lows, but Bright Spots Emerge

Prosus: Finally, a Catalyst; Cash Flows, Capital Allocation, Should Limit Drop in Discount to NAV

StubWorld: Naspers Is Cheap To Prosus & Look-Thru

Tencent: A Closer Look at Investees Reveals a Discount Rating and Future Value Unlock Potential

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Equity Bottom-Up

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%. 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).

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