Weekly Roundup 2022-11-25 – Prosus and Naspers

Weekly Roundup 2022-11-25 – Prosus and Naspers

Key Indicators

Index / Fund / Rate Start of Year Last week This Week % change YTD
JSE ALSI 73 723 72 577 73 151 -0,78%
NASDAQ Composite 15 833 11 146 11 226 -29,10%
S&P 500 4 797 3 965 4 026 -16,06%
Prime Lending Rate 7,25% 9,75% 10,50% 44,83%
Lunar BCI WW Flexible Fund 165,68 147,16 148,29 -10,50%
USD/ZAR 15,96 17,26 17,10 7,14%
EUR/ZAR 17,95 17,82 17,78 -0,95%
Brent Crude 77,86 87,82 81,71 4,94%

Source: iress

Company and Market News

Prosus and Naspers are related companies, through crossholdings with each other. Both are listed on the Johannesburg Stock Exchange and Prosus is also listed on the Amsterdam Stock Exchange. Their largest investment is a 28% stake in Tencent – one of China’s biggest technology companies. Tencent has multiple different businesses in entertainment, social media and video gaming. One of their most well-known products is the WeChat platform, that is used for chatting, but also for payments and other services. In 2001, Naspers acquired a 46.5% stake in Tencent for roughly $32 million. Today, that investment is worth approximately $95bn. An incredible investment.

The market however values Naspers and Prosus approximately 36% below the value of their assets less liabilities (Net Asset Value, or NAV). Generally, holding companies trade at a discount to NAV; but not by that high a discount value. This high discount may be due to: the high management fees, complicated crossholdings between Naspers and Prosus, potential risks associated with investing in Chinese companies and the poor performance of Naspers’s and Prosus’s other investments. At the last earnings call, Naspers and Prosus said that they were going to sell small stakes in Tencent so that they could buy back their own shares in an effort to unlock value for their shareholders. Since June this year, Prosus and Naspers have purchased a combined $5.8 bn worth of their own stock.

Naspers, released their H1 2023 results last week. A great amount of focus was put on their ecommerce businesses. Naspers has multiple investments within the classifieds, food delivery, fintech, and education technology spaces. Some of the more noticeable companies in their portfolio include: Takelot, OLX, iFood, PayU and Udemy. The ecommerce space is proving quite tricky for Naspers and Prosus to get right, requiring high levels of investments to build scale and become profitable; and operating in highly competitive environments. In all their ecommerce categories, revenue grew but all recorded trading losses. Last week, the share price for Prosus decreased by 3,35%.

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Listen to last week’s radio session here: https://youtu.be/N1mCJ8hyCNk

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Disclosures
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
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The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This roundup is prepared for the clients of Lunar Capital (Pty) Ltd. This roundup does not constitute financial advice and is generated for information purposes only.
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Lunar Capital
on Eastwave Radio

Every Wednesday, at 07h45, Sabir chats with Nazia from Eastwave Radio (92.2 fm, live stream on
www.eastwave.co.za) on investing and the markets.

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