Prosus

INVESTMENT SUMMARY AS AT 31 DECEMBER 2023

Prosus remains a sizeable holding in our funds. We were pleased by recent management actions that, once again, illustrated their commitment to narrowing the discount and maximising shareholder value. As part of the recent results, management announced the simplification of its corporate structure, which involves removing the previously created cross-shareholdings. This cross-shareholding created complexity and most likely contributed to the persistent discount to net asset value. 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, and while the fundamental delivery of Tencent has been pleasing in 2023, the share has sold off due to overall macroeconomic concerns. Tencent now trades on 10 times forward earnings, excluding the value of its investment portfolio, which represents 31% of the market capitalisation. We expect Tencent to continue to grow earnings at a double-digit rate, therefore making the starting valuation extremely compelling.

Prosus then trades at a 11% discount to its shareholding in Tencent, with the non-Tencent assets representing another 40% of the Prosus current market capitalization. Therefore, we believe there is a significant margin of safety embedded in the investment case, and it should deliver very compelling returns going forward.

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