Prosus: Naspers announces its giant participation in Tencent in Amsterdam

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Naspers (NAPRF), the South African company that hit the jackpot with an early investment in Tencent (TCEHY), sells its 31% stake in the Chinese Internet group via the listing of a new company on the Amsterdam Stock Exchange.
Baptized Prosus, the company will have a market value of at least 95 billion euros ($ 105 billion) on Wednesday, making it the largest consumer technology company in Europe. It is also the second largest technology company in the region after SAP in Germany. On the Euronext Amsterdam market, only Royal Dutch Shell (RDSA) and Unilever (UL) are worth more.
Naspers only paid $ 32 million in 2001 for its stake in Tencent. This investment now represents 118 billion euros (130 billion dollars). It's a return rivaled only by From SoftBank (SFTBY) $ 20 million of punt on Ali Baba (Baba) in 2000, which allowed the Japanese company to hold a 132 billion dollars.

But the unexpected gains have created a headache for Naspers. It now represents 25% of the combined value of the 40 largest companies listed on the Johannesburg Stock Exchange, compared to 5% five years ago. This forces investors to sell Naspers shares so as not to be overly exposed to a single stock. As a result, Naspers is trading at a discount of about 30% to 35% of the value of its assets, said Jean Pierre Verster, founder and CEO of Protea Capital Management.

It is there that the move to Amsterdam should help. After listing at Prosus, Naspers' weighting in Johannesburg's top 40 is expected to fall to around 18% to 19%, Verster said.

Prosus will also give limited funds for investment in European listed companies the opportunity to get acquainted for the first time with the Chinese Internet sector, added Verster.

Tencent, which owns the WeChat messaging platform and a multitude of payment and mobile gaming applications, is one of the largest technology groups in China. Naspers will continue to own at least 73% of Prosus, which also holds other technology assets such as holdings in the Delivery Hero restaurant app, OLX group online classifieds and the Russian mail.ru Internet company.

Naspers estimates that the demand for passive investors in Prosus shares could reach $ 3 billion, following the inclusion of the stock in several major global indices. Investments from European funds, actively managed growth funds and technology should prevail, said Bob van Dijk, CEO of Naspers, in a video ahead of the list.

Will Naspers find another Tencent?

The transaction also involves risks for Naspers. Investors should have a clearer idea of ​​the performance of his other bets, which could determine whether the reduction on the stock decreases further.

Even when Tencent is excluded, Naspers has generated returns of over 20% per year, significantly outperforming most stock markets, said Ruan Stander, portfolio manager at Allan Gray, portfolio manager in Cape Town. The company owns 2.2% of Naspers.

Naspers has already sold stakes in Indian e-commerce company Flipkart and the Polish-based online market, Allegro Group, are making substantial profits.

He will now focus on growing global businesses in online classifieds, food delivery, payments and fintech, van Dijk said.

"The list of their classifieds business under the OLX brand could be the next step," Charl said. Wolmarans, Analyst at Avior Capital Markets.

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