Our opinion on the current state of PRX

On 11th September 2019, Naspers (NPN) separately listed Prosus (PRX) on the Euronext in Amsterdam to house all its international assets including its stake in Tencent, Mail.Ru and other internet brands. Naspers holds 73% of Prosus and there is a 25% free float. One of the benefits of the Euronext listing is that it removes the risk inherent in the rand, so Prosus is a rand-hedge which rises when the rand weakens and vice versa. Prosus is now Europe's largest consumer internet company. The main asset of Prosus is 26% of Tencent - a Hong Kong-listed company that provides social media services and gaming in China. Tencent has 10 of China's 20 top mobile applications reaching over 1,1bn users. Tencent remains vulnerable to the authoritarian regulators in China and their involvement in the gaming industry. Prosus describes itself as, "a global consumer internet group operating across a variety of platforms and geographies and is one of the largest technology investors in the world. The Prosus Group's businesses and investments serve more than 1.5 billion people in 89 markets and are the market leaders in 77 of those markets. The Prosus Group's consumer internet services span the core focus segments of Classifieds, Payments and Fintech as well as Food Delivery, plus other online businesses including Etail and Travel." The share has benefitted from its inclusion in the Stoxx 50 index from September 2020. On 4th October 2021 Prosus announced that it had invested R1,3bn in Ula, a start-up e-commerce platform in Indonesia. On 7th March 2022 Prosus said that it had asked its board members of VK Group (previously known as Mail.ru) to resign after the CEO was added to a US sanctions list. Prosus owns 27% of VK worth about $769m or R12bn. In addition to VK, Prosus has about 4000 employees in Russia and a further 350 in Ukraine. On 14th March 2022, a report in the international media suggested that Tencent's "WeChat" service would face a substantial fine from the Chinese authorities for allowing money laundering. The share fell by more than 10%. On 18th May 2022 Tencent issued a statement saying that its profit in the March 2022 quarter was half of what it had been in 2021 - leading to a negative impact of Prosus shares. On 24th June 2022, the company said that it intended to sell some of its Tencent shares to finance an extended open-ended share buy-back program. This caused the share price to jump up. On 19th August 2022, the company announced that it had acquired the remaining 33,3% of iFood for R25,5bn. On 24th October 2022, the re-election of Chinese leader Xi Jinping for a third term caused Prosus shares to fall heavily. Jinping is part of a faction in Chinese politics which aims to keep the "disorderly expansion of capital" under control. In its results for the year to 31st March 2023 the company reported headline earnings per share (HEPS) of 46c down from the previous year's 201c. Core HEPS was 185c down from the previous year's 244c. Naspers announced on 27th June 2023 that it was going to unwind the cross shareholding between in at Prosus. The news was well-received by the market because it simplified the overall structure of both businesses making them easier to analyse. In a trading statement for the six months to 30th September 2023 the company estimated that HEPS would be between 46c and 48c compared with 7c in the previous period. Technically, the Prosus share price came off because of rand strength, the complexity of the share swap and then on 26th July 2021 the share fell 7% due to new Chinese regulations which impact on Tencent's music streaming business. The share, which was falling with the bear trend on international markets, then collapsed down to a new cycle low as a result of the re-election of Xi Jinping as Chinese premier. Since February 2023 the share has been moving sideways. We still believe that the share is undervalued at current levels. On 18th September 2023 the company announced that CEO, Bob van Dijk, would resign with immediate effect.