Naspers has been trading at a significant discount to its net asset value for years, putting pressure on the management team to unlock value.<\/p>\n
One of the strategies to unlock shareholder value was to list Naspers\u2019 Internet businesses separately under the newly established Prosus.<\/p>\n
Naspers claimed that it unlocked around R150-billion of value for shareholders through the Prosus listing, but the significant discount remained.<\/p>\n
In another attempt to unlock value and reduce the trading discount to its assets, Naspers investors were asked to swap their stock for shares in Prosus in 2021.<\/p>\n
This deal did little to add shareholder value and was described as \u201cidiotic\u201d by hedge fund manager Albert Saporta.<\/p>\n
\u201cIt\u2019s even more idiotic than the creation of Prosus, which was very idiotic,\u201d Saporta said.<\/p>\n
\u201cI had never seen a situation where management would create another structure above the holding company to reduce the discount, which is what Naspers did when they created Prosus.\u201d<\/p>\n
\u201cNow, two years down the line, they\u2019ve realised it\u2019s not working, and the discounts are higher than before, and they\u2019ve come up with an even more stupid idea \u2014 a cross-holding which will happen after the tender is successful.\u201d<\/p>\n
In the latest attempt to unlock value,\u00a0 Naspers and Prosus have embarked on a share repurchase programme<\/a><\/strong>.<\/p>\n The programme is designed to increase net asset value per share, taking advantage of Prosus\u2019s and Naspers\u2019s trading discounts to their underlying net asset value.<\/p>\n The repurchase programme is open-ended and will run as long as elevated levels of the trading discount to the group\u2019s underlying net asset value persist.<\/p>\n The programme is funded by an on-market sale of Tencent shares held by Prosus.<\/p>\n The company said Tencent is supportive of the withdrawal by Prosus of its voluntary restriction on the sale of its Tencent Shares.<\/p>\n Ranmore Fund Management founder, Sean Peche, has previously slated Naspers and Prosus management for poor acquisitions and destroying shareholder value.<\/p>\n Peche highlighted that in April 2021, Prosus sold 192 million Tencent shares, which amounts to 2% of its holding, for $14.6 billion.<\/p>\n Tencent\u2019s share price has fallen significantly since then, making it seem like an excellent decision that should be commended.<\/p>\n Not so fast, said Peche.<\/p>\n Prosus agreed not to sell any more Tencent shares for the next three years as part of the deal. It means they suffered a significant hit on their remaining 29% stake in the Chinese tech giant.<\/p>\n Prosus will also remain exposed to the whims and fancies of the Chinese Government, which has caused hardship for tech giants like Tencent and Alibaba.<\/p>\n The worst part is what Prosus management did with the $14.6 billion it made from selling a portion of its Tencent stake.<\/p>\n Last year, Prosus spent $6.3 billion buying back stock at \u20ac89.20. These stocks would cost $5.3 billion today, which means shareholders lost $1 billion.<\/p>\n The management team also spent R53 billion buying Naspers shares at R3,318 each. These shares are now worth R37 billion, destroying R16.5 billion in shareholder value.<\/p>\n In August, Prosus announced a $4.7 billion deal buying Indian payment services provider BillDesk.<\/p>\n Peche said BillDesk\u2019s unaudited management accounts showed a profit of $36.8 million and a net asset value (NAV) of $257 million.<\/p>\n It means Prosus paid 131 times earnings and 18 times the net asset value.<\/p>\n \u201cIt must be a small, high-growth business. Nope, apparently, 44 billion payments already take place in India with Billdesk generating $92 billion of total payment value,\u201d Peche said.<\/p>\n Considering the significant transaction value and $36.8 million profit, it equates to a net margin of only 0.04%.<\/p>\n \u201cHang on, don\u2019t you want businesses with pricing power in an inflationary environment because 131 years is a long time to wait just to get your money back before any return,\u201d he said.<\/p>\n Naspers used the rest of the cash from the Tencent sale to buy more Delivery Hero shares a few months ago.<\/p>\n \u201cAccording to Bloomberg filings, Naspers\/Prosus spent \u20ac3.1 billion in 2021 buying 26.6 million shares at an average price of \u20ac117 per share,\u201d Peche said.<\/p>\n After a recent trading update, which was essentially a profit warning, Delivery Hero\u2019s share price collapsed to \u20ac42.<\/p>\n \u201cThis means Naspers is down 64% on its Delivery Hero investment last year,\u201d he said.<\/p>\n Peche said with all these billions disappearing, it is good to keep cash away from the Naspers and Prosus management team.<\/p>\n Daily Investor asked Naspers for feedback about Peche\u2019s comments, but the company did not respond.<\/p>\n Naspers has three direct investments \u2013 100% ownership in Takealot.com and Media24 and a 42% shareholding in Prosus.<\/p>\n In the last financial year, Media24 made a trading profit of R17 million and Takealot made a trading loss of $7 million.<\/p>\n Prosus, through its significant Tencent shareholding, is where most of Naspers\u2019 value lies.<\/p>\n Prosus has a large portfolio of technology and internet companies, but delving into these companies\u2019 financials is challenging as many are not listed.<\/p>\n The good news is that a handful of these companies are listed, which makes it possible to assess their profitability.<\/p>\n The table below shows the net income margins of Prosus\u2019 listed investments.<\/p>\n The first column lists the most recent net income, and the second shows the company\u2019s average net income since listing.<\/p>\nNaspers\u2019 management decisions slated by Sean Peche<\/strong><\/h3>\n
How individual Naspers\/Prosus companies performed<\/strong><\/h3>\n
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