Naspers: Still A NAV Discount

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Naspers and Prosus both still trade at a NAV discount even when ignoring the VC portfolio, which may not be optimally positioned for the AI boom.At the group level, the Tencent stake which backs the ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nNaspers: Still A NAV Discount\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-31 03:55 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4731063-naspers-still-nav-discount><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Naspers and Prosus both still trade at a NAV discount even when ignoring the VC portfolio, which may not be optimally positioned for the AI boom.At the group level, the Tencent stake which backs the ...</p>\n\n<a href=\"https://seekingalpha.com/article/4731063-naspers-still-nav-discount\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4122","symbol_name":"互联网与直销零售","start_time":0,"source_url":"https://seekingalpha.com/article/4731063-naspers-still-nav-discount","article_id":"2479981761","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1426780662/image_1426780662.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2479981761","pubTimestamp":1730318149,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Naspers and Prosus both still trade at a NAV discount even when ignoring the VC portfolio, which may not be optimally positioned for the AI boom.At the group level, the Tencent stake which backs the N","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4122":"互联网与直销零售","BK4220":"综合零售","NAPRF":"Naspers Ltd.","NPSNY":"Naspers(腾讯南非大股东)"},"translate_title":"Naspers：资产净值仍有折扣","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NAPRF":0.9,"NPSNY":0.9},"content_text":"Naspers and Prosus both still trade at a NAV discount even when ignoring the VC portfolio, which may not be optimally positioned for the AI boom.At the group level, the Tencent stake which backs the NAV discount is being sold at a trickle to buy back the NAV discount, which creates shareholder value.The issue is that a possible Trump victory could impact Chinese markets negatively, or at least increase risks, and we have other clearer shots elsewhere in our coverage.   hapabapa Naspers (OTCPK:NPSNY) has been doing somewhat well of late thanks to a recovery in major holding and needle-mover Tencent (OTCPK:TCEHY) which has continued since our last coverage. The recovery of Tencent has been in line with the general recovery in Chinese market which has been hanging on to the possibility of continued stimulus to get the Chinese economy out of the doldrums caused by a deleveraging in real estate which accounts for a disproportionate amount of their economy. Prosus, Naspers' primary holding, continues to trade at a discount to NAV. Naspers trades at a discount to Prosus (OTCPK:PROSY) which further increases the NAV discount and the value proposition. There is a bit of an outstanding question about the VC portfolio. It is not particularly levered to areas of interest such as AI and Fintech, which are the only areas that have seen major activity since the VC highs some years ago. Particularly, late-stage VC has been suffering as the IPO markets continue to be closed. A more established VC portfolio like Naspers isn't in the limelight. This possibly limits the extent to which the VC portfolio should be considered in the model. Data by YChartsNAV Calculations and Discussion We have updated the NAV calculations with the latest financial data.   Valuation (VTS) Venture Comments As detailed in our initiating piece on the company, Naspers owns Prosus, which owns Tencent and also some other VC holdings. Some of the VC holdings are quite recognizable like Stack Overflow. Many are located in South Africa, which is why we were covering the elections and which we believe worked out for the best as far as Naspers portfolio is concerned - certainly not in such a way where asset values should be discounted or compromised further. The portfolio isn't really levered towards the sort of plays that are now getting attention. Until the AI boom, VC markets were also basically shut - a serious VC depression akin to what was seen in the dotcom bust in some instances, as the cost of capital and inflation issues brought on by the Ukraine war took hold on funding markets. The South African venture markets were also particularly bad, especially in areas like ecommerce, food delivery and other things that were beginning to take a back seat towards the end of COVID-19 and had heavy and expensive funding needs.   Portfolio (Prosus FY Pres) For the US holdings, there is also the risk of AI disruption. While Stack Overflow is going to be a very useful repository of coder troubleshooting language data, the platform other than that is at risk of decline due to the co-pilots that are becoming popular for use in coding - although anecdotally, we're told that it's dawning on coders that just thinking about the code themselves, outside of boilerplate code, ends up going faster and produces more efficient code longer term. What is for sure is that the Naspers portfolio is relatively established, and is more towards the late stage in VC. This is not good. IPO markets are still pretty slow. There was a decent level of equity underwriting earlier this year, but it came in a single salvo of deals that probably just absolutely needed to happen the moment markets saw any sort of recovery at all. But in all, late-stage venture deals are falling in total value QoQ and are considerably lower than pre-2022 levels still. Corporate venture capital also remains depressed, which isn't that great for the parts of the Naspers portfolio like in classifieds and African Fintech that would be attractive to be folded into a corporate group. Deal counts are way below pre-2022 figures, as are the number of corporate venture investors participating in markets. But at least the Fintech VC market is seeing some general strength globally, but the notable lack of recovery in corporate venture is a bit of a concern for the idiosyncratic and African elements of the Naspers VC portfolio. AI, of course, is going hot and is single-handedly lifting VC at this point. The bottom line as far as the NAV discount goes is that we'd lean conservatively on the value of the Naspers VC portfolio since it might be dead capital for a while longer, and may come with write-downs from the proposed valuations we gave. Tencent Prosus is clearly discounted when just considering the mark-to-market value of Tencent. However, and what we didn't consider in our last article because we just assume they'll keep deferring the matter, when considering possible tax implications, and we saw them in 2021 when Prosus partially sold Tencent in the largest block trade ever, taxes are incurred to an extent that they explain quite a bit of the discount. Prosus bought Tencent in the extremely early days, around 2001, which means most of the value of their shares is from capital gains. We can't break down the exact tax implications, but it is clear that being a Netherlands-based entity, Prosus will have to pay a significant tax when they sell any shares. However, there are some caveats here, as the company does run an operating loss with its VC style exposures. This means that if they sell Tencent at a trickle, which they do in order to buy back their own shares at the NAV discount, either at the Naspers or the Prosus level, they can limit the amount that they are ultimately liable for. So we aren't ready to ignore that there is a NAV discount.  By year-end, the group NAV discount had reduced by 4 percentage points from 42% to 38%, creating over US$30bn of value for shareholders since inception of the ongoing repurchase programme. To fund the process, we realised US$7.2bn from the sale of 2% of Tencent’s issued share capital, reducing our stake to 24.6%. By year-end, the programme had reduced the free float cumulatively by more than 20% since its initiation in June 2022. From the FY 2024 Report  In terms of the state of the Chinese markets and what is happening with Tencent, they are over the hump of some of the specific issues that were plaguing the Chinese video game industry, which is ringfenced and heavily regulated, coming out with a recent new mobile game blockbuster. With Tencent and the general Chinese market index being pretty correlated, in part because of Tencent's considerable representation in that index on a weighted value basis, the general considerations for Chinese macro right now such as the US elections but most importantly the domestic real estate situation, need to be considered. The situation broadly is that while there is some concern about a trade war with the US, particularly if Trump wins, that is secondary to the more important matter of whether the Chinese economy is going to come out of the doldrums. Chinese markets recovered sharply recently, then fell again partially, with the markets wondering about the extent and future of Chinese stimulus for the economy. Support for lending and real estate currently have been welcome, with Chinese domestic consumption being a dark spot, but a Trump win could derail the bright spot of Chinese exports. We aren't terribly excited about the prospects with Chinese equities. While markets may have already accounted for economic disintegration continuing at this point, which has been the state of affairs for a couple of years now, we are still uncertain that monetary policy will be enough to buoy an overdeveloped real estate market and restore confidence of indebted Chinese developers and homeowners. Bottom Line Markets may be more comfortable with a Trump win than last time as far as China is concerned, but it would still be somewhat of a kick in the gut, and it would very likely diminish the Yuan. Also, it still stands that the Chinese economy is in a deleveraging. There is no getting around that it will take years to deal with that fully. We aren't crazy about Chinese markets. As far as the VC portfolio is concerned, we don't think it's exceptionally well positioned, either. The cost of capital is still an issue. South African interest rates have remained high, signaling a difficult VC environment there, and their portfolio doesn't have many explicit AI elements nor is it benefiting from the seed funding skew with positions that are substantially poised for takeover by corporate VC or IPOs. Nonetheless, with the share repurchase system they use in selling Tencent at a trickle to buy back their own shares at a NAV discount, we don't dislike Naspers and in turn Prosus as investment propositions. There is a discount there, and it's backed by a massive and liquid company. But we think there are clearer shots elsewhere.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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