Buy Tencent Stock at 45% Discount to Current Price. Naspers Stock Analysis
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Tencent and Naspers
Naspers is an unbelievable venture capital story, surprisingly out of Africa.
While Tencent is by far the company's most successful investment, Naspers has found success with other bets.
In May 2020, it netted $1.6 billion from the sale of its 11% stake in India's e-commerce platform Flipkart. Naspers first invested in Flipkart in 2012.
Looking forward, Naspers, CEO Bob van Dijk said he sees the best investment potential in three online areas: food delivery services, mobile payments and classified ads.
The company makes 90% of its revenue in Brazil, Russia, India, China and South Africa, and it's looking to those markets for future growth.
Assets
Ok, so this is how the Naspers structure works.
We have Naspers as the Venture Capital company, and they recently spun off Prosus, which holds all the international assets outside of South Africa.
Prosus is listed on the Amsterdam stock exchange.
So Prosus is the company that owns the Tencent stock. But Naspers owns 72% of Prosus.
Think of Prosus like a holding company.
Prosus has some interesting investments.
Tencent being the major one
Others you might be familiar with are, (circle these as I say them in the picture)
Mail.ru - They own 30% of the major email and social media company in Russia. About a 6 Billion dollar company.
Udemy - Online course company
Similar Web - Web tool for researching website data
PayU - PayU is one of the largest online payment service platforms in the developing world, with a prominent position in 17 countries.
Letgo - in the United States, an app with over 75 million downloads that aims to become a top destination for buying and selling unwanted stuff.
iFood - Brazilian food delivery company which is the biggest in South America.
Swiggy - Indian food delivery startup, which the CEO Van Dijk described as "the fastest growing company I've seen in a decade."
OLX - is a massive classifieds website, India, Poland and Brazil’s largest marketplace website.
How to find the Buy Price
That would mean an enterprise value of Naspers of about $78 Billion, and considering the current enterprise value is $83 billion, we are just about right there.
But remember, I am not factoring any of the other assets. So I’m getting a great discount to Tencent, plus exposure to lots of other businesses that could potentially become very profitable.
Oh, and the stock market ticker is NPSNY.
Opinion
If they ever sold their Tencent holdings, I would be out of this. I don't want to invest in a venture capital business, I want to primarily invest in Tencent. I see this as a back door, with some loaded upside potential.
I don’t like the high executive payments, but I can let it slide because they are still heavily invested with 10x the salary in stock.
I do really like that the company holds other assets that I do think are really good and I am familiar with.
I also like their focus on India.
I think India is a fascinating investment area.
There are a lot of very smart, gifted, entrepreneurs in India and with a massive population to expand into, I like the Indian market for start ups a lot. Plus we are getting most of this for free.
Plus the share buybacks might finally be a catalyst for reducing the difference between Tencent and Naspers NAV.
I think if I could, I would much prefer to invest directly in Tencent shares at 30-50% margin of safety. Somewhere under $50.
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