South African e-commerce group Naspers is listing its international internet assets, including its 31% stake in China’s Tencent, in Amsterdam on Wednesday under the name of Prosus.
What is Prosus?
Prosus, a Latin word that can be translated as “forwards”, is a portfolio manager that invests in fast-growing consumer internet companies in developing nations.
The new entity’s biggest draw is the stake in conglomerate Tencent, the world’s biggest videos game company, a social media platform to rival Facebook via its billion-user WeChat app, as well as a payments giant. At current prices, Prosus’ stake in Tencent alone is worth $130 billion.
Prosus in numbers
Stripping out the Tencent stake, for the fiscal year ended in March 2019, revenue rose by 15% to $2.65 billion from $2.30 billion, and the group’s operating loss narrowed to $418 million from $615 million.
Prosus accounts for the Tencent stake as an “equity accounted investment” – a single line that added $3.41 billion euros to Prosus’ 2019 pretax profit.
Fiscal 2019 net profit ended up being $4.25 billion, thanks to a $1.6 billion one-time profit on its sale of a 10% stake in Flipkart to Walmart.
Where does Prosus come from and why is it listing in Amsterdam?
Under the guidance of tycoon Koos Bekker, South African company Naspers made an astute $36 million investment in Tencent back in 2001, that has since grown out of all proportion with its other holdings.
Naspers has become both the largest company on the Johannesburg Stock Exchange and the largest listed company in Africa by market value.
But Naspers trades at a 30% discount to the value of its Tencent stake. Its dominance of the Johannesburg exchange and local indexes makes it difficult for local investors to limit their exposure to a single share that, in fact, derives most of its value outside Africa.
The plan to spin Prosus off as a Dutch holding company is primarily driven by the desire to lower the discount and open Naspers’ various holdings up to a new set of investors. Naspers will retain a roughly 75% stake in Prosus.
How big is the listing?
Huge by market capitalisation. Indicative pricing by the Amsterdam Euronext exchange put Prosus’ share value at 58.70 euros per share, implying a market capitalisation of 95.3 billion euros, or $105 billion. That would make Prosus the third-largest company on the exchange, behind Shell and Unilever and ahead of semiconductor chip equipment maker ASML. The free float should be roughly 25%, but that number isn’t fixed.
How will this listing work?
Euronext issued its indicative price based on Naspers’ value converted to euros at the close of trading in Johannesburg on Sept. 10, and it said it had registered 1.62 billion shares.
For each original Naspers share, Naspers shareholders will receive either 1 Prosus share or an additional 0.37 new shares in Naspers itself.
Because shareholders can choose which until Friday, Sept. 13, it’s not known exactly how many Prosus shares there will be, or how liquid they will be. Movements in the share prices of the two companies should be linked.
What else is there to Prosus?
Although an investor in the share should examine Tencent’s prospects above all, Prosus also owns stakes in an array of other consumer internet companies. These may not be household names for most European investors, but many are growing quickly in China, Brazil, India and Russia.
What are Prosus’ other holdings?
In the consolidating food and delivery sector, Prosus owns a 22% stake in Delivery Hero, and 18% of Takeaway.com . Prosus also owns 54.8% of iFood, Brazil’s biggest food delivery firm, and a 38.8% stake in Swiggy, India’s biggest.
In Russia, it owns a 28% stake in Russia’s profitable Mail.ru internet company.
In online classifieds, Prosus owns 80% of LetGo in the United States, and it wholly owns OLX, popular in Brazil and India.
In online travel, it owns a 6% stake in Ctrip, China’s answer to Booking.com.
In payments, it owns 99% of PayU, a competitor to Adyen and WorldPay.
In e-commerce, it owns an 82% stake in Latin America’s Movile, a smartphone-based marketplace.
And in education, Prosus has stakes in Codecademy, Brainly, and Udemy, among many others.