Prosus = Tencent With A BIG DISCOUNT + MORE!!!
Summary
Value Investing with Sven Carlin, Ph.D. presents Prosus as a strong value investing opportunity, primarily driven by its substantial stake in Tencent, which Value Investing with Sven Carlin, Ph.D. contends can be acquired at a significant discount through Prosus. Value Investing with Sven Carlin, Ph.D. explains that Prosus's net asset value (NAV) is around $153 billion or 62 euros per share, significantly higher than its market capitalization of approximately $90 billion. This implies that investors are getting Prosus's other diverse businesses, which include holdings in food delivery, finance, and online experiences (like Meituan, Delivery Hero, Just Eat Takeaway, Despegar, and OLX), essentially for free.
Value Investing with Sven Carlin, Ph.D. acknowledges an inherent holding discount of 30-50% for Prosus but asserts that the ongoing value-accretive share buybacks are effectively narrowing this gap, reducing the float by 40% and increasing the net asset value per share by 80%. Value Investing with Sven Carlin, Ph.D. notes that Prosus's non-Tencent businesses are showing strong financial improvements, with EBITDA becoming significantly positive for the first time and cash flows ramping up for the second year, suggesting self-sustainability and a reduced drag on the overall business. Value Investing with Sven Carlin, Ph.D. also points out that Prosus's P/E ratio is around 8, much lower than Tencent's, despite generating 8.3 billion in profits on a 90 billion market cap. While Value Investing with Sven Carlin, Ph.D. warns about potential "crazy acquisitions" such as the $460 million investment in French AI company Alan, which Value Investing with Sven Carlin, Ph.D. calculates as a high cost per customer, Value Investing with Sven Carlin, Ph.D. concludes that Prosus is a "very interesting situation" for investors looking to own Tencent cheaper while also gaining exposure to potentially valuable, though currently underestimated, adjacent businesses.
Mentioned Stocks
Reasoning: Value Investing with Sven Carlin, Ph.D. refers to a previous analysis where Tencent was considered "fairly priced" with "likely 9-10% long-term returns," and suggests "doubling down" on the stock when China is deemed "uninvestable." Value Investing with Sven Carlin, Ph.D. highlights that Prosus offers a strategic way to own Tencent at a cheaper price due to the holding company discount. Value Investing with Sven Carlin, Ph.D. also notes that Tencent's growing dividend directly benefits Prosus, and Prosus's method of selling some Tencent shares to fund its own share buybacks effectively increases the proportion of Tencent ownership for each remaining Prosus share, adding value for Prosus shareholders.
Reasoning: Value Investing with Sven Carlin, Ph.D. recommends Prosus as a strong value investment opportunity. Value Investing with Sven Carlin, Ph.D. points out that Prosus's net asset value (NAV) is significantly higher (around $153 billion or 62 euros per share) than its market capitalization (approximately $90 billion). This gap implies that investors are getting Prosus's ~23% stake in Tencent (valued at 45 euros per share alone) at a discount, with all other Prosus businesses essentially for free. Value Investing with Sven Carlin, Ph.D. highlights the company's value-accretive share buybacks, which have reduced the float by 40% and increased the NAV per share by 80%, effectively increasing Tencent ownership per Prosus share. Furthermore, Prosus's non-Tencent businesses, spanning food delivery, finance, and online experiences, are showing improving profitability with positive EBITDA and growing cash flows, reducing reliance on Tencent and adding to the overall value proposition. Value Investing with Sven Carlin, Ph.D. notes its P/E ratio is much lower than Tencent's. While acknowledging risks like questionable acquisitions (e.g., Alan), Value Investing with Sven Carlin, Ph.D. believes the overall value proposition and management's focus on buybacks make Prosus a compelling "bargain" and "a very interesting situation to process" for investors seeking discounted exposure to Tencent.