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Delayed Hong Kong Stock Exchange  -  11:59 2022-08-07 pm EDT
301.20 HKD   -2.08%
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Tencent stock falls as Prosus/Naspers to sell shares to fund buybacks

06/27/2022 | 04:28am EDT
Illustration shows smartphone with Naspers' logo

JOHANNESBURG/AMSTERDAM (Reuters) - Dutch technology investor Prosus NV on Monday announced it will gradually sell down its massive stake in Tencent, reversing a pledge to retain the holding for a couple of years and knocking shares in the Chinese tech giant.

Prosus will use proceeds to repurchase shares, a move aimed at closing a gap between the market value of Prosus and parent Naspers and the market value of the 28.9% stake in Tencent they own, which is currently worth about $136 billion.

Prosus itself is currently worth less at some 109.8 billion euros ($116.2 billion).

"This will efficiently unlock immediate value for shareholders because we're selling (Tencent) shares at full value and we're buying back our stock at a considerable discount," CFO Basil Sgourdos said.

Prosus shares, which are down 27% in the year to date, jumped 10% on the news to 58.36 euros in Amsterdam as of 0750 GMT.

Shares in Naspers in Johannesburg were up 13% while shares in Tencent were down 1.5% in Hong Kong.

The share sale plan came as a surprise as Prosus had agreed not sell further Tencent shares after selling a 2% stake worth $15 billion in 2021.

Asked about whether violating the lock-up pledge was a problem, Sgourdos said no.

"It's something we had to consider in arriving at this decision. (But) we think that this is the right thing for our shareholders. And, you know, we have Tencent support in this decision."

Tencent said it expects the impact of the share sale to be "limited".

"We support our long-term shareholders on their initiative to increase their net asset value per share through a share repurchase program," it said.

Prosus and Naspers shares have fallen sharply over the past year amid a government crackdown on Chinese tech companies.

But Sgourdos said the company is still committed to China.

"We still have a very strong belief in Tencent and the Chinese economy and its ability to grow," he said.

Investors say the complicated cross-holding structure between Prosus and Naspers has also been a factor in depressing their share price.

In addition to Tencent, Prosus houses all of Naspers' overseas investments in online classifieds, food delivery, fintech and education software.

Both the companies reported a fall in trading profit for the full year ending March 31, as their portfolio of investments boosted sales while losses increased.

Revenue and profit earned from Tencent dwarf the contributions from Prosus/Naspers' other businesses.

The current discount of Prosus to the value of assets it owns is 54% and Naspers is 65%, according to company-provided figures based on analyst reports and market valuations of their stakes in listed companies.

($1 = 0.9446 euros)

(Reporting by Promit Mukherjee in Johannesburg and Toby Sterling in Amsterdam, Donny Kwok and Josh Ye in Hong Kong, Miyoung Kim in Singapore.; Editing by Shri Navaratnam and Kim Coghill)

By Promit Mukherjee, Toby Sterling and Josh Ye

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
MSCI SINGAPORE (GDTR) 0.58% 5826.71 Real-time Quote.-7.72%
NASPERS LIMITED 0.95% 2449.97 End-of-day quote.-0.89%
PROSUS N.V. -2.02% 63.62 Real-time Quote.-13.48%
SOFTBANK GROUP CORP. 0.96% 5705 Delayed Quote.4.03%
TENCENT HOLDINGS LIMITED -2.08% 301.2 Delayed Quote.-32.66%
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Sales 2022 579 B 85 656 M 85 656 M
Net income 2022 115 B 17 046 M 17 046 M
Net cash 2022 84 382 M 12 479 M 12 479 M
P/E ratio 2022 22,8x
Yield 2022 0,42%
Capitalization 2 530 B 374 B 374 B
EV / Sales 2022 4,22x
EV / Sales 2023 3,53x
Nbr of Employees 116 213
Free-Float 62,6%
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Mean consensus BUY
Number of Analysts 53
Last Close Price 264,96 CNY
Average target price 391,26 CNY
Spread / Average Target 47,7%
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Managers and Directors
Hua Teng Ma Executive Chairman & Chief Executive Officer
Chi Ping Lau Chief Strategy & Investment Officer
Hai Feng Lin President
Shek Hon Lo Chief Financial Officer & Senior Vice President
Chen Ye Xu Chief Information Officer
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