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MarketScreener Homepage  >  Equities  >  Stock Exchange of Hong Kong  >  Tencent Holdings Ltd    0700   KYG875721634

TENCENT HOLDINGS LTD

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Introducing Prosus: A Rare European Mega-Tech Company Stock

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09/11/2019 | 07:30am EDT

By Alexandra Wexler

Shares in an internet conglomerate that is the largest shareholder in China's Tencent Holdings Ltd. soared Wednesday, after listing its assets under the name Prosus NV in Amsterdam -- instantly creating a rare European tech giant.

Prosus, which is made up of the international internet assets of South African holding company Naspers Ltd., gives Europe significant exposure to a fast-growing, consumer-facing tech company.

Shares in Prosus were trading up more than 25% at EUR74.56 ($82) each in European trading on Wednesday morning, from a reference price of EUR58.70 a share provided by Naspers, making Prosus one of the most valuable companies in Europe by market capitalization, valued at around $133 billion.

Europe lacks its own tech giants. Business process software maker SAP SE has a market capitalization of around $148 billion, but doesn't have a consumer-facing focus.

If the valuation holds up, however, Prosus would end the day as one of the 15 largest companies in Europe by market cap, between oil giants Total SA and BP PLC, according to FactSet. It is the third-largest company on the Amsterdam exchange after Royal Dutch Shell PLC and consumer giant Unilever NV.

Prosus owns a nearly one-third stake in the Chinese internet and gaming colossus Tencent, as well as holdings in Russian social-media operator Mail.ru Group Ltd., German food-delivery business Delivery Hero and U.S. online marketplace Letgo, among others.

The listing, which didn't raise any new money from investors, appeared to succeed in narrowing the discount investors slapped on South Africa-listed Naspers compared with the value of its Hong-Kong listed Tencent stake. The Tencent stake, now housed in Prosus, is worth more than $131 billion on paper.

Naspers has long traded for less than that, despite having additional profitable businesses, such as its online classifieds segment.

Investors applied a discount on Naspers shares compared with its Tencent holding because Naspers would need to pay a dividend-withholding tax should it ever sell its stake in Tencent and distribute the proceeds to investors. Another reason is lack of liquidity: Investors can also gain direct access to Tencent shares through its Hong Kong listing.

"The discount on the Prosus listing is a lot narrower than the discount on the Naspers listing," said Hannes van den Berg, co-head of South African equity and multiasset at Investec Asset Management. For the Naspers investor, "Am I better off today than I was yesterday? Yes."

Naspers executives said the company had become too big for its home on the Johannesburg Stock Exchange -- where it comprises about a quarter of the benchmark JSE SWIX Index. They wanted to develop a new investor base by trading its shares in Europe, where large, listed tech companies are scarce.

Founded in South Africa in 1915, Naspers was originally De Nationale Pers Beperkt, or the National Press Ltd., which produced a Dutch-language newspaper for the country's Afrikaner population. In the 1980s, the company began expanding beyond its publishing roots, including into video entertainment.

Naspers paid $34 million for its original Tencent stake in 2001, and Tencent is now one of the world's most valuable companies. Naspers sold 2% of Tencent last year, netting a near $10 billion windfall. Much of Naspers' growth in recent years can be attributed to the rise in value of its stake in Tencent, best known in China for its WeChat messaging app.

Late last year, Naspers led a $1 billion funding round in Swiggy, India's largest food-delivery platform and committed $400 million in funding for iFood, the leading online food-delivery platform in Latin America. In the U.S., in addition to Letgo, a competitor of Craigslist Inc., Naspers has made bets including Honor, an online network of home-care agencies for the elderly, FarmLogs, which provides technology solutions for row-crop farming and Udemy, an online learning marketplace.

For the Amsterdam listing, existing Naspers shareholders in South Africa are issued one Prosus share for each Naspers share. Individual investors in South Africa have the option to receive an additional Naspers share in lieu of the Prosus share, which might be more attractive to them for tax reasons. Those shareholders have until Friday to make that decision.

Naspers plans to retain at least 73% of Prosus, with the final amount expected to be announced on Monday after South African individual investors submit their decisions.

Write to Alexandra Wexler at alexandra.wexler@wsj.com

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Financials (CNY)
Sales 2019 381 B
EBIT 2019 120 B
Net income 2019 96 583 M
Finance 2019 51 371 M
Yield 2019 0,32%
P/E ratio 2019 31,6x
P/E ratio 2020 27,9x
EV / Sales2019 7,75x
EV / Sales2020 6,01x
Capitalization 3 005 B
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Mean consensus BUY
Number of Analysts 45
Average target price 374,24  CNY
Last Close Price 316,35  CNY
Spread / Highest target 35,8%
Spread / Average Target 18,3%
Spread / Lowest Target -13,4%
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Managers
NameTitle
Hua Teng Ma Chairman & Chief Executive Officer
Chi Ping Lau President & Executive Director
Yu Xin Ren COO & President-Interactive Entertainment Group
Shek Hon Lo Chief Financial Officer & Senior Vice President
Chen Ye Xu Chief Information Officer
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