Prosus: Naspers lists its giant Tencent stake in Amsterdam

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Naspers (NAPRF), the South African media company that hit the jackpot with an early investment in Tencent (TCEHY), on Wednesday spun out its 31% stake in the Chinese internet group by listing a new company on Amsterdam’s stock exchange.
Called Prosus, the company was worth €95 billion ($105 billion) at listing, making it the biggest consumer tech stock in Europe and the second biggest tech company in the region behind German software group SAP (SAP).
Prosus shares soared 26% by the close, boosting its market value to €120 billion ($132 billion). On Amsterdam’s Euronext exchange, only Royal Dutch Shell (RDSA) and Unilever (UL) are worth more.
Naspers paid just $32 million back in 2001 for its stake in Tencent. That investment is now worth €118 billion ($130 billion). It’s a return rivaled only by SoftBank’s (SFTBY) $20 million punt on Alibaba (BABA) in 2000, which secured the Japanese company a stake that’s worth $132 billion.

But the windfall gains created a headache for Naspers. It accounted for 25% of the combined value of the 40 biggest companies on the Johannesburg Stock Exchange — up from 5% just five years ago. That forced investors to sell Naspers’ shares so they weren’t overly exposed to a single stock. As a result, Naspers traded at a discount of about 30%-35% of the value of its assets, said Jean Pierre Verster, founder and CEO of Protea Capital Management.

That’s where the move to Amsterdam should help. Following the Prosus listing, Naspers’ weighting in Johannesburg’s top 40 should fall to around 18%-19%, said Verster.

Prosus also gives funds restricted to investing in European-listed companies the opportunity to get exposure to China’s internet sector for the first time, Verster added.

Tencent, which owns the WeChat messaging platform and a host of payment apps and mobile games, is one of China’s largest technology groups. Naspers will continue to own at least 73% of Prosus, which also holds other technology assets such as stakes in restaurant app Delivery Hero, online classifieds business OLX Group and Russian internet company Mail.ru.

Naspers estimates that demand from passive investors for shares in Prosus could total as much as $3 billion, following the stock’s inclusion in a number of large global indexes. Investment from actively managed European, growth and technology funds is expected to top that, Naspers CEO Bob van Dijk said in a video posted ahead of the listing.

Will Naspers find another Tencent?

The deal also carries some risk for Naspers. It should become clearer to investors how its other bets are performing, which could determine whether the discount on the stock narrows further.

Even when Tencent is excluded, Naspers has delivered returns of more than 20% a year, considerably outperforming most equity markets, said Ruan Stander, a portfolio manager at Cape Town-based asset manager, Allan Gray. The firm owns 2.2% of Naspers.

Naspers has previously sold stakes in Indian e-commerce company Flipkart and Poland-based online marketplace Allegro Group at substantial profits.

It’s now going to focus on growing global businesses in online classifieds, food delivery, and payments and fintech, van Dijk said.

“The listing of their classifieds business under the OLX brand could be the next step,” said Charl Wolmarans, an analyst at Avior Capital Markets in South Africa.



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