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Naspers decision: Tencent down, Prosus up

June 29, 2022

Tencent’s share price in Hong Kong fell back 1.5 per cent on June 28th, but Prosus NV stock jumped 10 per cent on the Amsterdam market while shares in Naspers (on the Jo-berg market) rose 13 per cent on the decision by Naspers to buy back its own stock for cancellation.

Prosus/Naspers CEO Bob van Dijk said of the buyback plan, underlining that the process will be gradual but there was no specific timeframe or size limit on the sales. As a rough indication, the company pointed to a maximum sale of 3-5 per cent of the daily trade volume in Tencent shares.

“It’s a big bazooka idea to address a market inefficiency but that also retains our exposure to (Tencent) one of the best companies on the globe,” Van Dijk said.

Equity analysts at investment bank Jefferies agreed, saying that Prosus now has a new structure for its senior management (an open-ended highly accretive strategy to sell Tencent and buyback Prosus for the forseeable future).

The bank praises the move and dramatically altered its ‘base case’ target share price (from €50 to €67 per share).

Jefferies reminded investors that Prosus is Europe’s largest consumer internet group because of its massive stake in Tencent. The bank would like the Ukraine/Russia crisis to end (wouldn’t everyone) and which would further benefit Prosus because of its stakes in Avito and VK.

Exane/BNPP also took a positive view of the move, saying that Prosus remains a “top pick” for the bank. “We continue to see significant appeal in the Prosus equity story via its exposure to China tech behemoth Tencent and a continued appealing risk reward on the discount.”

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