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Critics have long complained that Prosus is a one-hit wonder. Just a couple years ago, the value of the Dutch technology investor’s stake in Chinese internet giant Tencent was more than $130bn, totally overshadowing the rest of its portfolio. Now it has the numbers to prove it has other tricks up its sleeve.
Prosus’ core headline earnings rose 84 per cent to $5bn in the year to March. But more impressive was that its ecommerce business, which excludes the stake in Tencent, reported a full-year trading profit of $38mn for the same period for the first time ever. This business includes a large portfolio of companies ranging from delivery business iFood in Brazil to digital payments fintech PayU in India.
Prosus is controlled by Naspers, South Africa’s answer to Japanese tech investor SoftBank. Like SoftBank’s success with its early investment in Alibaba, Naspers has also built its reputation as a strong stockpicker after taking a stake in Tencent as early as 2001 for just $32mn.
Two years ago, however, this comparison came with mainly negative connotations. Other investments Prosus held looked weak compared with Tencent. Its glaring discount to net asset value, which swelled to as much as around 50 per cent as the value of Tencent soared, was something SoftBank also shared.
Since then, while a discount remains, Prosus has been narrowing the gap through an open-ended share buyback programme. It has sold down its stake in Tencent to 25 per cent from 26.2 per cent to fund the share repurchases.
Its portfolio is also growing. It has more than 80 investments focused on food delivery, fintech and edtech in fast-growing markets, such as in Europe, India and Brazil. Those include household names, such as Meituan, China’s largest food delivery platform, DoorDash, the largest food delivery platform in the US, German peer Delivery Hero and Chinese travel group Trip.com. Group free cash flow tripled to $524mn
Prosus’ shares are up about a third in the past six months, with Naspers up 22 per cent, reflecting the improvement in portfolio companies.
Meanwhile, Tencent’s stock performance remains strong. A 34 per cent rally in Tencent shares in the past six months means yet more capital that could be used towards more share buybacks. That could even leave space for Prosus to join SoftBank in the frenzy to find winners in artificial intelligence.
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