BROKERS’ NOTES: Buy Naspers, sell Thungela

Willem Oldewage, portfolio manager: Nitrogen Fund Managers 

BUY: Naspers 

We’d be buying Naspers, specifically, because it is trading at a deeper discount to the underlying portfolio than Prosus. Management were waiting for Reserve Bank approval (for their share buybacks) so they couldn’t implement the buybacks fairly, but they kept on buying Prosus shares, so they are now catching up with Naspers. The fact that they’re not buying more Naspers shares than Prosus shares is another reason to buy Naspers. They’re buying about $100m of Naspers shares a week compared to $200m of Prosus. The rumour (of the CITIC-led Chinese consortium wanting to buy Prosus's Tencent holding) definitely shows the deep value in Asia tech and how it’s all in play. Chinese tech shares are still very high-quality businesses trading at below double-digit p:es. So what you’re buying effectively here is Tencent, but at a five times earnings. 

SHORT/SELL: Thungela 

The first comment is that the cure for high prices is high prices. If you look at the global environment around energy prices, there’s definitely some pushback from governments. US President Joe Biden is talking about a windfall tax on energy companies, so there is a change in the narrative. If you look at Thungela’s current share price, it’s discounting the fact that Richards Bay coal prices will stay at these elevated levels. Prices are already down 40% in two months, so that’s pretty negative and I think the momentum is not going to go away. The backwardation in the Richards Bay coal forward price curve continues to July 2026, which means the expectation on coal prices from the market isn’t great. Thungela has been a great windfall for quick money but it’s still coal — and terrible for any portfolio manager with environmental, social and governance constraints. I think the dividends are going to run dry and the share price is going to reflect that very quickly.