The following segment was excerpted from this fund letter.
Naspers Limited (OTCPK:NPSNY)
In my opinion, Naspers/Prosus/Tencent has turned from one of the JSE’s high valuation darlings into a contrarian bet with attractive valuations. I believe Tencent is a great asset, a combination of:
China-related concerns justify a higher risk premium and discount rate, but I do not believe Tencent is facing an existential crisis, and I do not believe that its earnings ability has been diminished. If anything, Tencent is incentivized to under-report earnings, so they are likely earning more than it appears. At the Prosus level, the market is seemingly ignorant of the non- Tencent portfolio – a slumbering giant in emerging market food delivery, online classifieds, and payments.
Naspers is not in favor at the moment. With Tencent off -40% from recent highs and Naspers trading at -60% discount to its look-through SOTP, I believe we own a fantastic collection of technology businesses with a huge margin of safety embedded in the discount.
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