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Prosus: Naspers lists its giant Tencent stake in Amsterdam



Naspers ( NAPRF ) the South African company that hit the jackpot with an early investment in Tencent ( TCEHY ) spins out its 31% stake in the Chinese internet group through the listing of a new company on the Amsterdam Stock Exchange.
Called Prosus, the company will have a market capitalization of at least $ 95 billion ($ 105 billion) when it notes on Wednesday, making it the largest consumer technology company in Europe. It is also the second largest technology company in the region after SAP in Germany. On Amsterdam's Euronext exchange, only Royal Dutch Shell ( RDSA ) and Unilever ( UL ) and worth more.
Naspers paid back only $ 32 million in 2001
for its stake in Tencent. This investment is now worth € 118 billion ($ 130 billion). It is a return that only competed by SoftBanks ( SFTBY ) $ 20 million pound on Alibaba ( BABA ) in 2000, which secured the Japanese company a $ 132 billion stake.

But the gain has created a headache for Naspers. It now accounts for 25% of the total value of the 40 largest companies on the Johannesburg Stock Exchange – up from 5% just five years ago. It forces investors to sell Nasper's shares so that they are not exposed to a single stock. As a result, Naspers trades at a discount of about 30% -35% of the value of the assets, says Jean Pierre Verster, founder and CEO of Protea Capital Management.

This is where the move to Amsterdam should help. After the Prosus listing, Nasper's weighting in the Johannesburg Top 40 should drop to around 18% -19%, Verster said.

Prosus will also provide limited funds for investing in European listed companies the opportunity to gain exposure to China's Internet sector for the first time, Verster added.

Tencent, which owns the WeChat messaging platform and a variety of payment apps and mobile games, is one of China's largest technology groups. Naspers will continue to own at least 73% of Prosus, which also has other technological assets such as shares in the restaurant app Delivery Hero, the online classifieds business OLX Group and the Russian internet company Mail.ru.

Naspers estimates that the demand from passive investors for shares in Prosus could amount to as much as $ 3 billion, after the stock's inclusion in a number of large global indices. Investments from actively managed European, growth and technology funds are expected to top, Naspers CEO Bob van Dijk said in a video posted ahead of the listing.

Do Naspers Find Another Tencent?

The agreement also carries a certain risk to Naspers. It should be clearer to investors how the other games are performing, which may determine whether the discount on the stock decreases further.

Even when Tencent is excluded, Naspers has delivered returns of more than 20% a year, which outperforms most of the equity market, said Ruan Stander, Cape Town-based asset manager, Allan Gray. The company owns 2.2% of Naspers.

Naspers has previously sold shares in Indian e-commerce company Flipkart and the Polish based online marketplace Allegro Group with significant profits.

It will now focus on accustomed global businesses in classifieds, food delivery and payment and fintech, van Dijk said.

"Listing their classifieds under the OLX brand may be the next step," said Charl Wolmarans, an analyst at Avior Capital Markets.


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