Naspers says Prosus unit to be valued at about R1.52-trillion
Investors have given the go-ahead for a plan to list the new entity on the Euronext exchange
Naspers said on Monday a newly created entity containing assets including its stake in Chinese internet giant Tencent will be valued at about a tenth of the JSE’s R13.36-trillion value.
Africa’s largest company by market value received shareholder backing last week to proceed with the listing of Prosus in Amsterdam in September. Alongside the Tencent stake, the new company will hold businesses from Brazil to Germany in industries such as online food delivery and classified advertising.
A value of $100bn (R1.52-trillion) would make only Royal Dutch Shell and consumer-goods giant Unilever bigger in Amsterdam by market capitalisation. The company would overtake ASML Holding, a semiconductor gear-maker priced at about $89bn (R1.35-trillion).
Naspers opted to list Prosus, in which it will keep a 73% stake, to ease its dominance of the JSE and hopes this will help to address the fact that its share price has been trading at a discount for some time.
This means despite having the largest market capitalisation on the JSE at R1.48-trillion, the sum of Naspers’s assets is worth more than it is trading at.
“It’s difficult to say if the discount will be closed,” Asief Mohamed, chief investment officer at Aeon Investment Management, said, explaining that the new company structure will give shareholders essentially the same economic interest.
Naspers group CFO Basil Sgourdos said in an interview the company had already made significant progress in closing its discount gap.
“Before we started this process, the discount was at 43%. Today it’s roughly at 35%. That’s already $10bn of value creation for shareholders,” he said.
Peter Takaendesa, portfolio manager at Mergence Investment Managers, does not think the Prosus deal will be enough to close the gap. However, he said it is likely to narrow until it stabilises at “normal holding company discount” of between 10% and 20%.
The new group’s assets were valued at about $34bn at the end of June, Naspers said in a statement on Monday. It said Prosus was expected to be one of the 10 largest consumer internet groups in the world when it starts trading.
Having been at last week’s shareholder meeting, Mohamed said their firm was firmly behind the Euronext listing as it would open Naspers up to a much bigger pool of investors. This could help to increase demand in the shares and drive up its price on the JSE.
That said, Takaendesa cautioned that Prosus’s performance in the short term may be affected by negative global sentiment as US-China trade tensions are driving global technology stocks down.
Naspers stock ended the day 1.14% down on Monday at R3,380 per share.
The stock could gain by a further 40% to R4,800, JPMorgan Chase analysts led by JP Davids said in a note published on Monday.
“In addition to Tencent’s outperformance, we expect the recent compression in the holding company’s discount to be sustained as it reduces its SA sovereign exposure.”
Prosus profit after tax in the first quarter rose 30.6% from a year before to $1.4bn (R21.3bn), Naspers said.
JPMorgan, Goldman Sachs Group and Morgan Stanley are the main financial advisers on the Prosus listing.