PROSY - Naspers: Prosus Not Fully Recognised Venture Assets Negatively Valued

2024-02-13 08:00:00 ET

Summary

• With a substantial holding in Tencent Holdings and other publicly listed, mark-to-market non-operating assets, Naspers Limited consolidated and non-consolidated growth holdings are negatively valued.
• While some are closer to a venture profile, most are clearly inflecting into profitability. Poor funding conditions could not even justify a $0 value in this case, let alone negative.
• Taking a conservative sum-of-the-parts approach to the non-public portfolio, the Naspers upside opportunity is almost 40% based on the NAV discount.
• Tencent is already substantially discounted despite its massive properties, and is a widely followed stock whose pricing is efficient.
• With excellent liquidity including on its OTC US listing, there is no reason why Naspers should remain this undervalued. Substantial buybacks of 17% of the Prosus N.V. float means interim payout.

Naspers Limited ( NPSNY ) is the most dominant listing on the JSE (JSE: NPN), and is well-known enough where even its US OTC listing has plenty of liquidity, often with millions in daily volume in dollar value. Naspers invested in Tencent Holdings ( TCEHY ) more than a decade ago for some $34 million for almost half the company , with the Tencent value almost hitting $1 trillion at one point during COVID-19 before some headwinds. It has other listed assets, and importantly also a wide portfolio of late-stage venture profile holdings including companies like Stack Overflow, which every coder on the planet will know and is probably worth billions.

The bottom line is that its stake in the holding company that owns 25% of Tencent accounts for more than Naspers' market cap. While there are some worries around videogaming in China and Chinese markets in general, Tencent is the pre-eminent Chinese equity, and, of course, offers a valid mark-to-market valuation. The negative EV case here highlights that its broad venture portfolio is also given a negative value, which doesn't seem reasonable for any venture portfolio even given the funding environment in VC is probably not going to get worse, and anyway, most of Naspers portfolio businesses are inflecting into profitability....

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