INVESTMENT SUMMARY AS AT 31 DECEMBER 2023
Naspers and Prosus remain sizeable holdings in our balanced and equity funds. We were pleased by recent management actions that, once again, illustrated their commitment to narrowing the discount to net asset value (NAV) and maximising shareholder value. The announced simplification of its corporate structure involves removing the previously created cross-shareholdings, which created complexity and most likely contributed to the persistent discount to NAV. This simplification also removed any constraints to Naspers’s ongoing share buyback programme, which continues to create shareholder value at both Prosus and Naspers daily.
Tencent remains a key driver of the investment case for both Naspers and Prosus and while the fundamental delivery of Tencent has been pleasing in 2023, the share has sold off due to overall macro concerns. Tencent now trades on 10x forward earnings excluding the value of its investment portfolio which represents 31% of the market capitalization. We expect Tencent continue to grow earnings at a double-digit rate therefore making the starting valuation extremely compelling. Naspers then trades at a 7% discount to its shareholding in Prosus who in turn trades at a 9% discount to its shareholding in Tencent with the non-Tencent assets representing another ~40% of the Prosus current market capitalisation. We believe there is a significant margin of safety embedded into the investment case and it should deliver very compelling returns going forward.