Weekly Roundup 2022-06-24

Lunar Capital Weekly Roundup

Index / Fund / Rate Start of Year Last week This Week % change YTD
JSE ALSI 73 723 65 390 66 349 -10.00%
NASDAQ Composite 15 833 10 798 11 608 -26.68%
S&P 500 4 797 3 901 3 912 -18.44%
Prime Lending Rate 7.25% 8.25% 8.25% 13.79%
Lunar BCI WW Flexible Fund 165.68 131.69 136.20 -17.79%
USD/ZAR 15.96 16.06 15.81 -0.94%
EUR/ZAR 17.95 16.89 16.69 -7.02%

Source: iress

Company and Market News

Prosus and Naspers released their annual results for the year ended 31 March 2022. In the annual results, they announced that they would start a share repurchase programme for their Prosus and Naspers’ shares. This would be funded by regularly a selling small number of the Tencent shares. The idea is that they want to decrease the difference between their Market Cap and Net Asset Value (NAV), which has been trading at a significant discount.

As it currently stands, Prosus effectively owns 29% of Tencent. This is by far their biggest holding, which is currently worth $134 billion. Prosus also owns a multitude of small ventures in the E-commerce space such as OLX, PayU, and Movile. According to Prosus, on the 31 March 2022, the NAV per share of Prosus was ZAR 1,759 versus a closing price of R795.76, representing a discount 54.8%. post the announcement of the results, the closing price on the 27th of June 2022, was R1 039.48, increasing by 18% from the day before the results and announcement of the sale of Tencent shares and repurchase of Prosus and Naspers shares were published. This has reduced the discount.

Similarly, Naspers has also been trading at a discount to its NAV and its shares went up by 22.8% on 27 June 2022, from the day before the results were announced. The estimated NAV per share of Naspers on 24 June 2022 was R5 398.30 per share versus the closing price on 27 June 2022 of R2 348.69, presenting a discount to NAV of 56% despite the 22.8% increase.

The sale of Tencent shares will be done in an orderly way, with no more than 2-3% of the daily trading volume of Tencent shares on the Hing Stock Exchange being traded.

Over and above the share repurchase programme, Naspers and Prosus have indicated that they plan to continue investing in other ventures that have the goal of generating sustainable returns over the long term. However, for the current year none of their other ventures, apart from the classified portfolio in Prosus\’s books and Media portfolio in Naspers’ books, have generated a profit. These loss making businesses together with high management costs will continue to discount Nasper and Prosus share prices versus their respective NAV.

 

Disclosure: Prosus and Naspers are held in the Lunar BCI Worldwide Flexible Fund.

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