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

GEM Weekly (1 Jul 2022): Asia PMI; Prosus, Tencent, JD.com, Samsung Electronics, GlobalWafers

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

Naspers & Prosus Exchange Offer - Accretion Vs Complexity

2021 High Conviction: Naspers, Deeply Discounted Exposure to Accelerating Online Sales

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

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<p>Following the completion of <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a>’ voluntary exchange offer for <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> shares, we are left with management having achieved their goal of meaningfully reducing Naspers’ overweight position on the notable South African equity indices (a key driver of the discount to NAV), and increasing the Prosus free float materially, with a commensurate increase in index weightings. It has also left us with a cross-holding structure which has significantly increased the complexity of trading dynamics, increased currency risk exposures, and a reduced corporate governance perception of the group. </p>
<p>In a detailed insight last year (<a href="https://www.smartkarma.com/insights/naspers-double-discount-warranted-the-search-for-a-catalyst-continues" target="_blank" data-smartkarma-citation="insights:44014" rel="noopener">Naspers: “Double” Discount Warranted? The Search for a Catalyst Continues</a>), I analysed what I believed to be the 6 key drivers of Prosus’ and Naspers’ holding company discounts to find a catalyst for value unlock, and perhaps an interesting, discounted entry point to <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>. Following the exchange offer, which has just been concluded, I revisit these drivers and update the fundamental sum-of-the-parts valuations for both Prosus and Naspers.</p>

Following the completion of Prosus (PRX NA)’ voluntary exchange offer for Naspers (NPN SJ) shares, we are left with management having achieved their goal of meaningfully reducing Naspers’ overweight position on the notable South African equity indices (a key driver of the discount to NAV), and increasing the Prosus free float materially, with a commensurate increase in index weightings. It has also left us with a cross-holding structure which has significantly increased the complexity of trading dynamics, increased currency risk exposures, and a reduced corporate governance perception of the group. 
In a detailed insight last year (Naspers: “Double” Discount Warranted? The Search for a Catalyst Continues), I analysed what I believed to be the 6 key drivers of Prosus’ and Naspers’ holding company discounts to find a catalyst for value unlock, and perhaps an interesting, discounted entry point to Tencent (700 HK). Following the exchange offer, which has just been concluded, I revisit these drivers and update the fundamental sum-of-the-parts valuations for both Prosus and Naspers.

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

Prosus NV

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