PRX - Prosus

[Lakesider]

Doesn’t look like we have a thread for this.

I sold my Prosus stake last winter after buying pre spinoff for an easy double and I have regretted it. The price hasn’t moved that much but Tencent has performed very well, the discount to the NAV here is quite large again so I am getting back in but this time I’m planning on keeping as a long term investment. I like the portfolio of companies that Prosus have acquired and all seem well position for future growth. Management have been buying back shares of prosus and Naspers with excess cash in order to reduce the discount. 

To invest here you must be positive about the future prospects of Tencent as its the source of the majority of the value. After the recent dip in china and the underwhelming outcome of the antitrust investigations I’m comfortable that Tencent will continue to grow in the near future making the current valuation fair. 

I have been guilty of undervaluing growth and investing on balance sheet cheapness in the past causing me to largely underperform. Here i feel like i am getting both, buying for the discount and will stay for the growth. 

[Spekulatius]

Why PRX and not Naspers (NPSNY). NPSNY controls Proxus and seems to trade at a larger discount. I do agree that Proxus seems interesting as well. Naspers/Proxus are a  great way to get tech/VC exposure with a good capital allocator at a discount.

Tencent itself is great capital allocator and holding so you get this nested doll of Tencent->Proxus-> Naspers with discounts at each level.

[Lakesider]

So I do already own Naspers. But to buy more I prefer Prosus, both are trading at hefty discounts but I believe that Prosus has the best chance of narrowing the discount. I think the extra layer in the structure for Naspers is likely to increase the discount of owning Tencent, there are also problems caused the size of naspers relative to the south African exchange forcing selling of Naspers as investors in south Africa try to limit their exposure to one company. I’m not enthused about some of the political actions Naspers has been taking in south Africa and I'm not particularly interested in the media assets they hold. I’m happy to just go with Prosus.

[Ulverski]

Prosus borad is reworded for closing Naspers value gap. Which is ok for Naspers shareholders, but I don't think is so good for Prosus shareholders. Those money could be invested in other businesses and create more value than Naspers, which may never reach fair valuation.

Disclaimer: I own tiny position in Prosus. Don't have access to Naspers. I know they have alternative listing on LSE, but I can't see them on my broker account.

[Moogs]

On 4/15/2021 at 1:20 PM, Lakesider said:

Doesn’t look like we have a thread for this.

I sold my Prosus stake last winter after buying pre spinoff for an easy double and I have regretted it. The price hasn’t moved that much but Tencent has performed very well, the discount to the NAV here is quite large again so I am getting back in but this time I’m planning on keeping as a long term investment. I like the portfolio of companies that Prosus have acquired and all seem well position for future growth. Management have been buying back shares of prosus and Naspers with excess cash in order to reduce the discount. 

To invest here you must be positive about the future prospects of Tencent as its the source of the majority of the value. After the recent dip in china and the underwhelming outcome of the antitrust investigations I’m comfortable that Tencent will continue to grow in the near future making the current valuation fair. 

I have been guilty of undervaluing growth and investing on balance sheet cheapness in the past causing me to largely underperform. Here i feel like i am getting both, buying for the discount and will stay for the growth. 

With mostly US and european balance sheet cheapness in my portfolio I have been looking for some growth and China exposure so this looks interesting. Any thoughts on the ecommerce part of the portfolio? The EBITDA and cash flow numbers doesn't impress but valuing growth stocks isn't exactly my field of expertise... 

 

 

[Lakesider]

4 minutes ago, Moogs said:

The EBITDA and cash flow numbers doesn't impress but valuing growth stocks isn't exactly my field of expertise...

 

 

Join the club, I'm not smart enough to calculate the intrinsic value of a segment growing at 50%. I honestly cannot provide a good estimate of value for it, 15bn 30bn who know? But with Prosus trading at a discount to Tencent you are getting this for free. 

One thing I do know anecdotally is I’ve been passing on stocks growing at this clip in these sort of industries for years because they look expensive. A few years later I look at them again and kick myself. I like the strategy that Prosus is using investing in asset light long runway "techy service ecommerce", classified, food delivery etc.. I think it’s likely there is some gold in that portfolio somewhere. 

Now I know that does not answer your question but I for me it provides me a margin of safety.

[n.r98]

On 4/18/2021 at 1:46 AM, Lakesider said:

Join the club, I'm not smart enough to calculate the intrinsic value of a segment growing at 50%. I honestly cannot provide a good estimate of value for it, 15bn 30bn who know? But with Prosus trading at a discount to Tencent you are getting this for free. 

One thing I do know anecdotally is I’ve been passing on stocks growing at this clip in these sort of industries for years because they look expensive. A few years later I look at them again and kick myself. I like the strategy that Prosus is using investing in asset light long runway "techy service ecommerce", classified, food delivery etc.. I think it’s likely there is some gold in that portfolio somewhere. 

Now I know that does not answer your question but I for me it provides me a margin of safety.

Imo don't valuation gaps always exist in large conglomerates; capital allocator distrust, taxes etc? If so then we may never see the valuation gap close. Any particular venture company in Prosus' portfolio that has that "X-factor"?

[Lakesider]

The gap is 30-40%

[Lakesider]

5 minutes ago, Lakesider said:

The gap is 30-40%

Timely article on the WSJ, about naspers. I may have understated the discount, https://www.wsj.com/articles/naspers-has-a-100-billion-headache-11618738200

"The sale, its second reduction in three years, cut its stake to 29%, currently worth about $226 billion.The market capitalization of Naspers is 1.53 trillion South African rand, equivalent to about $107 billion."